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Fair value of financial instruments
3 Months Ended
Mar. 31, 2014
Fair value of financial instruments  
Fair value of financial instruments

2. Fair value of financial instruments

        The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. A fair value hierarchy has been established that prioritizes valuation inputs based on the observable nature of those inputs. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The hierarchy defines three levels of valuation inputs:

Level 1 inputs   Quoted prices in active markets for identical assets or liabilities

Level 2 inputs

 

Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

Level 3 inputs

 

Unobservable inputs that reflect the Company's own assumptions about the assumptions market participants would use in pricing the asset or liability

        The following table presents information about the Company's financial assets and liabilities that have been measured at fair value at March 31, 2014 and indicates the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands).

Description
  Total   Quoted prices
in active
markets
(Level 1)
  Significant
other
observable
inputs
(Level 2)
  Significant
unobservable
inputs
(Level 3)
 

Financial assets

                         

Cash equivalents

  $ 11,415   $ 11,415   $   $  

Short-term investments

    92,398         92,398      

Long-term investments

    8,234         8,234      
                   

Total financial assets

  $ 112,047   $ 11,415   $ 100,632   $  
                   
                   

Financial liabilities

                         

Liability classified stock-based compensation awards

  $ 292   $ 292   $   $  
                   

Total financial liabilities

  $ 292   $ 292   $   $  
                   
                   

        The following table presents information about the Company's financial assets that have been measured at fair value at December 31, 2013 and indicates the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands).

Description
  Total   Quoted prices
in active
markets
(Level 1)
  Significant
other
observable
inputs
(Level 2)
  Significant
unobservable
inputs
(Level 3)
 

Financial assets

                         

Cash equivalents

  $ 17,000   $ 17,000   $   $  

Short-term investments

    82,423         82,423      

Long-term investments

    22,344         22,344      
                   

Total financial assets

  $ 121,767   $ 17,000   $ 104,767   $  
                   
                   

Financial liabilities

                         

Liability classified stock-based compensation awards

  $ 717   $ 717   $   $  
                   

Total financial liabilities

  $ 717   $ 717   $   $  
                   
                   

        The Company's cash equivalents and investments are comprised of money market accounts, government-sponsored enterprise securities and corporate bonds of publicly traded companies. These investments have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing third party pricing services or other market observable data. The pricing services utilize industry standard valuation models, including both income and market based approaches and observable market inputs to determine value. These observable market inputs include reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events. The Company validates the prices provided by third party pricing services by reviewing their pricing methods and matrices, obtaining market values from other pricing sources, analyzing pricing data in certain instances and confirming that the relevant markets are active. After completing its validation procedures, the Company did not adjust or override any fair value measurements provided by the pricing services as of March 31, 2014.

        The Company's liability classified stock-based compensation awards are comprised of restricted stock units (RSUs) that allow for greater than minimum statutory tax withholdings. These awards are valued based on the fair value of the Company's common stock underlying the awards, which is traded on an active market. During the first quarter of 2013, the Company amended the terms of certain RSUs to allow for cash tax withholdings greater than the minimum required statutory withholding amount. As a result of this change in the terms of the awards, the outstanding RSUs are considered to be liability instruments. As a result of this modification, the Company records a liability for the fair value of the awards as of each reporting date with the change in fair value recorded through the statement of operations. The Company will record stock-based compensation expense equal to the greater of the original grant date fair value of the awards or the settlement date fair value. During the quarter, the Company paid $498,000 to settle the tax liability for awards that settled during the period.