Fair Value Measurements

6 Months Ended

Jul. 31, 2019

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 condensed 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 July 31, 2019 (in thousands):



	Level 1		Level 2		Total
Assets
Cash equivalents:
Money market funds	$	17,180	$	—	$	17,180
Commercial paper	—		5,609		5,609
Corporate notes and bonds	—		2,647		2,647
Short-term investments:
Certificates of deposits	—		3,508		3,508
Asset-backed securities	—		82,952		82,952
Commercial paper	—		12,273		12,273
Corporate notes and bonds	—		224,542		224,542
Foreign government bonds	—		1,498		1,498
U.S. agency obligations	—		3,000		3,000
U.S. treasury securities	—		276,915		276,915
Total	$	17,180	$	612,944	$	630,124
Liabilities
Foreign currency derivative contracts	—		49		49
Total	$	—	$	49	$	49

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		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

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 condensed consolidated statements of comprehensive income. Cash flows from such forward contracts are classified as operating activities. We recognized realized foreign currency losses of $1.1 million and $1.2 million during the three and six months ended July 31, 2019, respectively, on hedging. Immaterial realized foreign currency losses and gains on hedging were recognized during the three and six months ended July 31, 2018, respectively.

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



	July 31, 2019			January 31, 2019
Notional amount of foreign currency derivative contracts	$	(65,258	)	$	(5,112	)
Fair value of foreign currency derivative contracts	(65,209		)	(5,024		)

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



		July 31, 2019	January 31, 2019
Derivative Liabilities	Balance Sheet Location
Derivatives not designated as hedging instruments:
Foreign currency derivative contracts	Accrued expenses	49	88

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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