FAIR VALUE

The FASB Codification topic, Fair Value Measurements and Disclosures, establishes a framework for measuring fair value and expands financial statement disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The FASB Codification does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. The FASB Codification requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

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

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

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

The accrued contingent consideration depicted below represents the potential earnout incentive for former Rycan shareholders, relating to the purchase of Rycan by HHI in 2015. We have estimated the fair value of the contingent consideration based on the amount of revenue we expect to be earned by Rycan through the year ending December 31, 2018.

The following table summarizes the carrying amounts and fair values of certain liabilities at September 30, 2017:



			Fair Value at September 30, 2017 Using
	Carrying Amount at		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In thousands)	9/30/2017		(Level 1)		(Level 2)		(Level 3)
Description
Contingent consideration	$	1,192	$	—	$	—	$	1,192
Total	$	1,192	$	—	$	—	$	1,192

The following table summarizes the carrying amounts and fair values of certain liabilities at December 31, 2016:



			Fair Value at December 31, 2016 Using
	Carrying Amount at		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In thousands)	12/31/2016		(Level 1)		(Level 2)		(Level 3)
Description
Contingent consideration	$	1,120	$	—	$	—	$	1,120
Total	$	1,120	$	—	$	—	$	1,120

The carrying amounts of other financial instruments reported in the consolidated balance sheets for current assets and current liabilities approximate their fair values because of the short-term nature of these instruments.