Fair Value Measurements

12 Months Ended

Dec. 31, 2013

Note 3. Fair Value Measurement

The following table presents the Company's assets and liabilities that are measured at fair value on a recurring basis, segregated by classes (in thousands):

	December 31, 2013
	Level 2			Level 3			Total
Assets:
Long term investment	$	1,634		$	-		$	1,634
Foreign exchange forward contracts not
designated as hedging instruments		301			-			301
Foreign exchange forward contracts
designated as hedging instruments		153			-			153
Liabilities:
Foreign exchange forward contracts not
designated as hedging instruments		(1,543	)		-			(1,543	)
Earn-out obligations		-			(29,025	)		(29,025	)
	$	545		$	(29,025	)	$	(28,480	)

	December 31, 2012
	Level 2			Level 3			Total
Assets:
Long term investment	$	1,634		$	-		$	1,634
Foreign exchange forward contracts not
designated as hedging instruments		1,818			-			1,818
Liabilities:
Foreign exchange forward contracts not
designated as hedging instruments		(765	)		-			(765	)
	$	2,687		$	-		$	2,687

Long term investment consists of an investment in debt securities classified as available-for-sale and are recorded at fair value. The fair value is based on the sale of similar securities in the market, as well as last sales of these securities in the market (Level 2 inputs).

Foreign exchange forward contracts are presented as other current liabilities and other current assets and are valued primarily based on observable inputs, including interest rate curves and both forward and spot prices for currencies (Level 2 inputs). At December 31, 2013, the Company had foreign exchange forward contracts in effect for the conversion of $54.0 million into €40.3 million and $18.3 million into NIS 65.0 million out of which the Company designated $5.8 million as cash flow hedge for accounting purposes. The change in fair value of those contracts of $0.2 million is included in accumulated other comprehensive income at December 31, 2013. These contracts mature through March 31, 2014.

Foreign exchange forward contracts in effect as of December 31, 2012 were for the conversion of €20.9 million into $26.8 million and $37.0 million into NIS 145.6 million.

The earn-out obligations are described in note 2 and are classified within level 3 because fair value is measured based on the probability-weighted present value of the consideration expected to be transferred. The consideration expected to be transferred is based on the Company's expectations of various financial metrics. The ultimate payment of earn-out obligations could deviate from current estimates based on the actual results of these financial measures.

Other financial instruments consist mainly of cash and cash equivalents, short term bank deposits, current and non-current receivables, accounts payable and accruals and the fair value of these financial instruments approximates their carrying values.

- 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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