Fair Value Measurements |
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Fair Value, Assets, Liabilities and Stockholders' Equity Measured on Recurring Basis [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | FAIR VALUE MEASUREMENTS The company uses a three-level classification hierarchy of fair value measurements for disclosure purposes.
Level 1 assets generally include U.S. Treasury securities, U.S. government agency securities, investments in publicly traded mutual funds, equity securities and corporate debt securities with quoted market prices. In general, the company uses quoted prices in active markets for identical assets to determine the fair value of marketable securities and equity investments. If quoted prices are not available to determine fair value, the company uses other inputs that are directly observable. Assets included in level 2 generally consist of asset-backed securities. Asset-backed securities were measured at fair value based on matrix pricing using prices of similar securities with similar inputs such as maturity dates, interest rates and credit ratings. The company determined the fair value of its contingent consideration liability, considered a level 3 liability, using a discounted cash flow model to calculate the present value of future payouts. The liability was included in level 3 because management used significant unobservable inputs, including a discount rate of 20% and payout probability of 100%. Significant increases or decreases in any of those inputs in isolation would result in a significantly different fair value. Financial assets and liabilities recorded in the consolidated balance sheets as of December 31, 2016 and 2015 were classified in their entirety based on the lowest level of input that was significant to each asset or liability's fair value measurement. Financial Instruments Measured at Fair Value on a Recurring Basis:
(1) Performance bonds and guaranty fund contributions on the consolidated balance sheets at December 31, 2016 and 2015 include cash collateral that has been invested in U.S. Treasury securities. Performance bonds and guaranty fund contributions on the consolidated balance sheet at December 31, 2016 also include cash collateral that has been invested in U.S. government agencies securities. There were no transfers of assets between level 1, level 2 and level 3 during 2016 and 2015. There were no level 3 assets valued at fair value on a recurring basis during 2016 and 2015. The following is a reconciliation of level 3 liabilities valued at fair value on a recurring basis during 2016 and 2015.
In the first quarter of 2016, the company sold a datacenter and leased back a portion of the property. Under generally accepted accounting principles, the transaction has been recognized under the financing method instead of recognized as a sale leaseback arrangement. As a result, the property and equipment legally sold will continue to be recognized on the consolidated balance sheets and was written down to a fair value of $130.0 million at March 31, 2016. During 2016, the company also recorded impairment charges totaling $5.5 million on one of its strategic investments. The fair value of the investment was estimated to be zero at September 30, 2016. Both assessments were based on qualitative indications of impairment and a quantitative analysis of undiscounted cash flows. The fair values of the datacenter and strategic investment are considered level 3 and nonrecurring. There were no other level 3 assets or liabilities valued at fair value on a nonrecurring basis during 2016 and 2015. The fair values of the fixed-rate notes due 2022, 2025 and 2043, which are classified as level 2 under the fair value hierarchy, were estimated using quoted market prices. At December 31, 2016, the fair values of the fixed-rate notes by maturity date were as follows:
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