Fair Value Measurements

3 Months Ended

Mar. 31, 2015

Note 7. Fair Value Measurements

Fair value is defined 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. A hierarchy has been established for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

Observable inputs are inputs that are developed using market data, such as publicly available information about actual events or transactions, and that reflect the assumptions that market participants would use when pricing the asset or liability. Unobservable inputs are inputs for which market data are not available and that are developed using the best information available about the assumptions that market participants would use when pricing the asset or liability. The fair value hierarchy is categorized into three levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date. Level 2 inputs include inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs). Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following tables summarize the Company's financial assets and liabilities that are carried at fair value on a recurring basis, by fair value hierarchy, in the condensed consolidated balance sheets:

	March 31, 2015
	Level 2			Level 3			Total
	U.S. $ in thousands
Assets:
Foreign exchange forward contracts not
designated as hedging instruments	$	4,007		$	-		$	4,007

Liabilities:
Foreign exchange forward contracts not
designated as hedging instruments		(2,811	)		-			(2,811	)
Foreign exchange forward contracts
designated as hedging instruments		(863	)		-			(863	)
Obligations in connection with acquisitions		-			(22,400	)		(22,400	)
	$	333		$	(22,400	)	$	(22,067	)

	December 31, 2014
	Level 2			Level 3			Total
	U.S. $ in thousands
Assets:
Foreign exchange forward contracts not
designated as hedging instruments	$	3,753		$	-		$	3,753

Liabilities:
Foreign exchange forward contracts not
designated as hedging instruments		(2,901	)		-			(2,901	)
Foreign exchange forward contracts designated
as hedging instruments		(1,243	)		-			(1,243	)
Obligations in connection with acquisitions		-			(35,656	)		(35,656	)
	$	(391	)	$	(35,656	)	$	(36,047	)

The following table is a reconciliation of the changes for those financial liabilities where fair value measurements are estimated utilizing Level 3 inputs, which consist of obligations in connection with acquisitions:

		Three months ended			Year ended
		March 31, 2015			December 31, 2014
		U.S. $ in thousands
Fair value at the beginning of the period	$	35,656		$	29,025
Cash settlements		-			(10,795	)
Additions		-			43,576
Change in fair value recognized in earnings		(13,256	)		(26,150	)
Fair value at the end of the period	$	22,400		$	35,656

The Company's obligations in connection with acquisitions as of March 31, 2015 are related to the deferred payments in connection with the Solid Concepts transaction. Change in fair value recognized in earnings during 2015 includes an unrealized gain of approximately $13.3 million due to revaluation of the deferred payments in connection with the Solid Concepts transaction. For further information refer to note 2.

The Company's foreign exchange forward contracts are classified as Level 2, as they are not actively traded and are valued using pricing models that use observable market inputs, including interest rate curves and both forward and spot prices for currencies (Level 2 inputs).

Other financial instruments consist mainly of cash and cash equivalents, short-term bank deposits, current and non-current receivables, short-term debt, accounts payable and accruals. 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.

+ References+ Details