4. Fair Value Measurements

The Company measures fair value as an exit price, representing the amount 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. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. Fair value measurements are based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

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Level 1: Observable inputs such as quoted prices in active markets;

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Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

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Level 3: Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.

Cash equivalents, marketable securities and long-term investments measured at fair value are classified in the table below in one of the three categories described above (in thousands):

	Fair Value Measurements
December 31, 2017	Level 1		Level 2		Level 3		Total
Certificates of deposit	$	1,225	$	—	$	—	$	1,225
Money market funds		21,760		—		—		21,760
U.S. treasuries		34,433		—		—		34,433
Auction rate securities		—		—		2,209		2,209
	$	57,418	$	—	$	2,209	$	59,627

	Fair Value Measurements
December 31, 2016	Level 1		Level 2		Level 3		Total
Certificates of deposit	$	7,275	$	—	$	—	$	7,275
Money market funds		1,171		—		—		1,171
U.S. treasuries		23,277		—		—		23,277
Auction rate securities		—		—		2,046		2,046
	$	31,723	$	—	$	2,046	$	33,769

The Company’s investments in U.S. treasury securities, certificates of deposit and money market funds are valued based on publicly available quoted market prices for identical securities as of December 31, 2017. The Company determines the fair value of other government-sponsored enterprise related securities with the aid of valuations provided by third parties using proprietary valuation models and analytical tools. These valuation models and analytical tools use market pricing or similar instruments that are both objective and publicly available, including matrix pricing or reported trades, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids and/or offers. The Company validates the valuations received from its primary pricing vendors for its level 2 securities by examining the inputs used in that vendor’s pricing process and determines whether they are reasonable and observable. The Company also compares those valuations to recent reported trades for those securities. The Company did not adjust any of the valuations received from these third parties with respect to any of its level 2 securities at December 31, 2017. The valuation of the Company’s investment in auction rate securities is more fully described in Note 3.

Activity for assets measured at fair value using significant unobservable inputs (Level 3) is presented in the table below (in thousands):

Balance at December 31, 2016	$	2,046
Total net realized gains included in earnings		—
Total net unrealized gains included in other comprehensive income		163
Net transfers in and/out of Level 3		—
Balance at December 31, 2017	$	2,209
Amount of total losses for the period included in net loss attributable to the change in unrealized gains or losses relating to assets still held at December 31, 2017	$	—

Total cumulative unrealized losses of $0.3 million relate to Level 3 assets still held as of December 31, 2017, none of which were recognized during the years ended December 31, 2017, 2016 and 2015. The losses, when recognized, are included in investment and other income.