FAIR VALUE MEASUREMENTS

The consolidated financial statements include financial instruments for which the fair market value of such instruments may differ from amounts reflected on a historical cost basis. Financial instruments of the Company consist of cash deposits, accounts and other receivables, investments, accounts payable, certain accrued liabilities, and borrowings under a revolving credit agreement. The carrying value of these financial instruments generally approximates fair value due to their short-term nature. Financial instruments also include long-term notes payable. See Note 9 for further information on the fair value of the Notes.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The Company prioritizes the inputs used to determine fair values in one of the following three categories:

Level 1—Quoted market prices in active markets for identical assets or liabilities.

Level 2—Inputs, other than quoted prices in active markets, that are observable, either directly or indirectly.

Level 3—Unobservable inputs that are not corroborated by market data.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes the Company's financial instruments which are measured at fair value on a recurring basis as of December 31, 2017 and 2016 (in millions):



December 31, 2017	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	52.2	$	22.8	$	—	$	75.0
Available-for-sale investments:
Bank time deposits	—		0.5		—		0.5
Corporate debt securities	—		445.5		—		445.5
Asset-backed securities	—		120.8		—		120.8
U.S. government and agency securities	20.6		48.1		—		68.7
Foreign government bonds	—		3.0		—		3.0
Commercial paper	—		40.3		—		40.3
Municipal securities	—		4.4		—		4.4
Investments held for deferred compensation plans	63.7		—		—		63.7
Derivatives	—		4.9		—		4.9
	$	136.5	$	690.3	$	—	$	826.8
Liabilities
Derivatives	$	—	$	24.8	$	—	$	24.8
Deferred compensation plans	64.1		—		—		64.1
Contingent consideration liabilities			—		244.3		244.3
	$	64.1	$	24.8	$	244.3	$	333.2

December 31, 2016
Assets
Cash equivalents	$	44.1	$	—	$	—	$	44.1
Available-for-sale investments:
Corporate debt securities	—		332.5		—		332.5
Asset-backed securities	—		85.8		—		85.8
U.S. government and agency securities	100.7		42.0		—		142.7
Commercial paper	—		35.4		—		35.4
Municipal securities	—		4.5		—		4.5
Equity investments in unconsolidated affiliates	0.1		—		—		0.1
Investments held for deferred compensation plans	46.0		—		—		46.0
Derivatives	—		35.2		—		35.2
	$	190.9	$	535.4	$	—	$	726.3
Liabilities
Derivatives	$	—	$	3.3	$	—	$	3.3
Deferred compensation plans	46.7		—		—		46.7
Contingent consideration liabilities	—		—		31.6		31.6
	$	46.7	$	3.3	$	31.6	$	81.6

The following table summarizes the changes in fair value of the contingent consideration obligation for the year ended December 31, 2017 (in millions):



Balance at December 31, 2016	$	31.6
Additions	222.6
Changes in fair value	(9.9		)
Balance at December 31, 2017	$	244.3

Cash Equivalents and Available-for-sale Investments

The Company estimates the fair values of its money market funds based on quoted prices in active markets for identical assets. The Company estimates the fair values of its time deposits, commercial paper, U.S. and foreign government and agency securities, municipal securities, asset-backed securities, and corporate debt securities by taking into consideration valuations obtained from third-party pricing services. The pricing services use industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades and broker-dealer quotes on the same or similar securities, benchmark yields, credit spreads, prepayment and default projections based on historical data, and other observable inputs. The Company independently reviews and validates the pricing received from the third-party pricing service by comparing the prices to prices reported by a secondary pricing source. The Company’s validation procedures have not resulted in an adjustment to the pricing received from the pricing service.

Investments in unconsolidated affiliates are long-term equity investments in companies that are in various stages of development. Certain of the Company's investments in unconsolidated affiliates are designated as available-for-sale. These investments are carried at fair market value based on quoted market prices.

Deferred Compensation Plans

The Company holds investments in trading securities related to its deferred compensation plans. The investments are in a variety of stock, bond, and money market mutual funds. The fair values of these investments and the corresponding liabilities are based on quoted market prices.

Derivative Instruments

The Company uses derivative financial instruments in the form of foreign currency forward exchange contracts and foreign currency option contracts to manage foreign currency exposures, and interest rate swap agreements to manage its interest rate exposures. All derivatives contracts are recognized on the balance sheet at their fair value. The fair value of foreign currency derivative financial instruments was estimated based on quoted market foreign exchange rates and market discount rates. The fair value of the interest rate swap agreements was determined based on a discounted cash flow analysis reflecting the contractual terms of the agreements and the 6-month LIBOR forward interest rate curve. Judgment was employed in interpreting market data to develop estimates of fair value; accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions or valuation methodologies could have a material effect on the estimated fair value amounts.

Contingent Consideration Liabilities

Certain of the Company's acquisitions involve contingent consideration arrangements. Payment of additional consideration is contingent upon the acquired company reaching certain performance milestones, such as attaining specified revenue levels, achieving product development targets, or obtaining regulatory approvals. These contingent consideration liabilities are measured at estimated fair value using either a probability weighted discounted cash flow analysis or a Monte Carlo simulation model, both of which consider significant unobservable inputs. These inputs include (1) the discount rate used to present value the projected cash flows (ranging from 1.3% to 3.4%), (2) the probability of milestone achievement (ranging from 25.0% to 100.0%), (3) the projected payment dates (ranging from 2018 to 2025), and (4) the volatility of future revenue (ranging from 45.0% to 50.0%). The use of different assumptions could have a material effect on the estimated fair value amounts.