FAIR VALUE

Inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect Cadence’s market assumptions. These two types of inputs have created the following fair value hierarchy:


•	Level 1 – Quoted prices for identical instruments in active markets;


•	Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and


•	Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

This hierarchy requires Cadence to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. Cadence recognizes transfers between levels of the hierarchy based on the fair values of the respective financial instruments at the end of the reporting period in which the transfer occurred. There were no transfers between levels of the fair value hierarchy during the six months ended July 1, 2017.

On a quarterly basis, Cadence measures at fair value certain financial assets and liabilities. The fair value of financial assets and liabilities was determined using the following levels of inputs as of July 1, 2017 and December 31, 2016:



	Fair Value Measurements as of July 1, 2017
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	447,890	$	447,890	$	—	$	—
Short-term investments:
Marketable equity securities	3,229		3,229		—		—
Trading securities held in Non-Qualified Deferred Compensation, or NQDC, trust	27,570		27,570		—		—
Foreign currency exchange contracts	934		—		934		—
Total Assets	$	479,623	$	478,689	$	934	$	—

As of July 1, 2017, Cadence did not have any financial liabilities requiring a recurring fair value measurement.




	Fair Value Measurements as of December 31, 2016
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	237,724	$	237,724	$	—	$	—
Short-term investments:
Marketable equity securities	3,057		3,057		—		—
Trading securities held in NQDC trust	26,622		26,622		—		—
Total Assets	$	267,403	$	267,403	$	—	$	—

	Total		Level 1		Level 2		Level 3
	(In thousands)
Liabilities
Foreign currency exchange contracts	$	2,653	$	—	$	2,653	$	—