Fair Value Measurements

12 Months Ended

Jan. 31, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 7. Fair Value Measurements

We apply the provisions of FASB ASC Topic 820, Fair Value Measurements and Disclosures, for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the consolidated financial statements. Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Topic 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements.

The carrying amounts of accounts receivable and other current assets, accounts payable and accrued liabilities approximate their fair value due to their short-term nature.

Financial assets and liabilities recorded at fair value in the consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, which are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities are as follows:

Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Financial assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires management to make judgments and considers factors specific to the asset or liability.

The following table presents the fair value hierarchy for financial assets measured at fair value on a recurring basis as of January 31, 2019 (in thousands):

	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Money market funds	$	39,168	$	—	$	—	$	39,168
Corporate notes and bonds		—		1,034		—		1,034
U.S. treasury securities		—		41,505		—		41,505
Short-term investments:
Certificates of deposits		—		6,010		—		6,010
Asset-backed securities		—		78,395		—		78,395
Commercial paper		—		9,117		—		9,117
Corporate notes and bonds		—		185,130		—		185,130
Foreign government bonds		—		1,491		—		1,491
U.S. agency obligations		—		15,912		—		15,912
U.S. treasury securities		—		243,135		—		243,135
Total	$	39,168	$	581,729	$	—	$	620,897
Liabilities
Foreign currency derivative contracts		—		88		—		88
Total	$	—	$	88	$	—	$	88

The following table presents the fair value hierarchy for financial assets measured at fair value on a recurring basis as of January 31, 2018 (in thousands):

	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Money market funds	$	25,820	$	—	$	—	$	25,820
Commercial paper		—		1,999		—		1,999
Corporate notes and bonds		—		2,080		—		2,080
U.S. treasury securities		—		8,000		—		8,000
Short-term investments:
Asset-backed securities		—		67,451		—		67,451
Commercial paper		—		19,914		—		19,914
Corporate notes and bonds		—		159,741		—		159,741
Foreign government bonds		—		1,486		—		1,486
Mortgage backed securities		—		11,480		—		11,480
U.S. agency obligations		—		71,131		—		71,131
U.S. treasury securities		—		110,576		—		110,576
Foreign currency derivative contracts		—		127		—		127
Total	$	25,820	$	453,985	$	—	$	479,805
Liabilities
Foreign currency derivative contracts		—		391		—		391
Total	$	—	$	391	$	—	$	391

We determine the fair value of our security holdings based on pricing from our service providers and market prices from industry-standard independent data providers. The valuation techniques used to measure the fair value of financial instruments having Level 2 inputs were derived from non-binding consensus prices that are corroborated by observable market data or quoted market prices for similar instruments. Such market prices may be quoted prices in active markets for identical assets (Level 1 inputs) or pricing determined using inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs). We perform procedures to ensure that appropriate fair values are recorded such as comparing prices obtained from other sources.

Balance Sheet Hedges

We enter into foreign currency forward contracts (the “Forward Contracts”) in order to hedge our foreign currency exposure. A foreign currency forward contract is a commitment to deliver a certain amount of currency at a certain price on a specific date in the future. By entering into Forward Contracts and holding them to maturity, we are locked into a future currency exchange rate in an amount equal to and for the terms of the Forward Contracts. We account for derivative instruments at fair value with changes in the fair value recorded as a component of other income, net in our consolidated statements of comprehensive income. Cash flows from such forward contracts are classified as operating activities. During the fiscal years ended January 31, 2019 and 2018, we recognized realized foreign currency gains on hedging of $0.3 million and foreign currency losses of $4.3 million, respectively.

The fair value of our outstanding derivative instruments is summarized below (in thousands):

	January 31,
	2019			2018
Notional amount of foreign currency derivative contracts	$	(5,112	)	$	36,266
Fair value of foreign currency derivative contracts		(5,024	)		36,531

Details on outstanding balance sheet hedges are presented below as of the date shown below (in thousands):

		January 31,
		2019		2018
Derivative Assets	Balance Sheet Location
Derivatives not designated as hedging instruments:
Foreign currency derivative contracts	Prepaid expenses and other current assets	$	—	$	127
Derivative Liabilities
Derivatives not designated as hedging instruments:
Foreign currency derivative contracts	Accrued expenses	$	88	$	391