FAIR VALUE MEASUREMENTS

Accounting rules for fair value provide that fair value is 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. 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. As a basis for considering such assumptions, the Company utilizes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:


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


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


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

Marketable Debt Instruments

Marketable debt instruments include instruments such as corporate bonds and debt, government agency bonds, bank deposits, municipal bonds, and money market mutual funds. When the Company uses observable market prices for identical securities that are traded in less active markets, the Company classifies its marketable debt instruments as Level 2. When observable market prices for identical securities are not available, the Company prices its marketable debt instruments using non-binding market consensus prices that are corroborated with observable market data; quoted market prices for similar instruments; or pricing models, such as a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data. Non-binding market consensus prices are based on the proprietary valuation models of pricing providers or brokers. These valuation models incorporate a number of inputs, including non-binding and binding broker quotes; observable market prices for identical or similar securities; and the internal assumptions of pricing providers or brokers that use observable market inputs and, to a lesser degree, unobservable market inputs. The Company corroborates non-binding market consensus prices with observable market data using statistical models when observable market data exists. The discounted cash flow model uses observable market inputs, such as LIBOR-based yield curves, currency spot and forward rates, and credit ratings.

Derivative Assets

The Company's derivative assets include interest rate swaps that are classified as Level 2 as the Company uses inputs other than quoted prices that are observable for the asset. The Level 2 derivative assets are primarily valued using standard calculations and models that use readily observable market data as their basis.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets measured at fair value on a recurring basis at March 31, 2015 are as follows (amounts in thousands):



	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Balance
Assets
Money market mutual funds	$	279,833	$	—	$	—	$	279,833
Marketable equity securities	13,166		—		—		13,166
Corporate bonds and debt	—		920,739		6,190		926,929
Time deposits ⁽¹⁾	—		506		—		506
Government agency bonds	—		742,256		—		742,256
Deposit accounts	—		327,982		—		327,982
Municipal bonds	—		41,698		—		41,698
Auction rate securities	—		—		9,825		9,825
Derivative assets	—		8,928		—		8,928
Total assets measured at fair value	$	292,999	$	2,042,109	$	16,015	$	2,351,123

⁽¹⁾ Time deposits in various financial institutions with maturities greater than three months that will mature within one year.

Assets measured at fair value on a recurring basis at March 31, 2014 are as follows (amounts in thousands):



	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Balance
Assets
Money market mutual funds	$	192,159	$	—	$	—	$	192,159
Corporate bonds and debt	—		937,776		6,190		943,966
Government agency bonds	—		681,394		—		681,394
Deposit accounts	—		274,444		—		274,444
Municipal bonds	—		41,709		—		41,709
Auction rate securities	—		—		9,825		9,825
Total assets measured at fair value	$	192,159	$	1,935,323	$	16,015	$	2,143,497

There were no transfers between Level 1 and Level 2 during fiscal 2015 or fiscal 2014.

At March 31, 2015 and March 31, 2014, the Company's ARS for which auctions were unsuccessful were related to the insurance industry and were valued at $9.8 million with a par value of $22.4 million. The Company estimated the fair value of its ARS, which are classified as Level 3 securities, based on the following: (i) the underlying structure of each security; (ii) the present value of future principal and interest payments discounted at rates considered to reflect current market conditions; (iii) consideration of the probabilities of default, auction failure, or repurchase at par for each period; and (iv) estimates of the recovery rates in the event of default for each security. The significant unobservable inputs used in the fair value measurement of the ARS as of March 31, 2015 were estimated risk free discount rates, liquidity risk premium, and the liquidity horizon. The risk free discount rate applied to these securities was 2% to 2.5% adjusted for the liquidity risk premium which ranged from 9.1% to 29.5%. The anticipated liquidity horizon ranged from 7 to 10 years. A significant increase in the liquidity premium or discount rate, in isolation, would lead to a significantly lower fair value measurement. A significant increase in the liquidity horizon, in isolation, would lead to a significantly lower fair value measurement. Each quarter the Company evaluates material changes in the fair value measurements of its ARS.

The following table presents a reconciliation for all assets and liabilities measured at fair value on a recurring basis, excluding accrued interest components, using significant unobservable inputs (Level 3) for the year ended March 31, 2014. There were no changes in the fair value of these assets measured on a recurring basis during fiscal 2015 (amounts in thousands):



Year ended March 31, 2014	Auction Rate Securities			Corporate Debt		Contingent Consideration			Total Losses
Balance at March 31, 2013	$	33,791		$	6,190	$	(19,100	)	$	—
Total gains (losses) (realized and unrealized):
Included in earnings	1,101			—		(1,370		)	(269		)
Included in other comprehensive income	(332		)	—		—			(332		)
Purchases, sales, issuances, and settlements, net	(24,735		)	—		20,470			—
Balance at March 31, 2014	$	9,825		$	6,190	$	—		$	(601	)

Gains and losses recognized in earnings using Level 3 inputs for ARS are credited or charged to Other Income (Expense) on the Consolidated Statements of Income. Gains and losses recognized in earnings using Level 3 inputs related to the revaluation of contingent consideration are credited or charged to Special Charges on the Consolidated Statements of Income.

Assets measured at fair value on a recurring basis are presented/classified on the consolidated balance sheets at March 31, 2015 as follows (amounts in thousands):



	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Balance
Assets
Cash and cash equivalents	$	279,833	$	327,982	$	—	$	607,815
Short-term investments	13,166		1,337,888		—		1,351,054
Long-term investments	—		367,311		16,015		383,326
Other assets	—		8,928		—		8,928
Total assets measured at fair value	$	292,999	$	2,042,109	$	16,015	$	2,351,123

Assets measured at fair value on a recurring basis are presented/classified in the consolidated balance sheets at March 31, 2014 as follows (amounts in thousands):



	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Balance
Assets
Cash and cash equivalents	$	192,159	$	274,444	$	—	$	466,603
Short-term investments	—		878,182		—		878,182
Long-term investments	—		782,697		16,015		798,712
Total assets measured at fair value	$	192,159	$	1,935,323	$	16,015	$	2,143,497

Assets Measured and Recorded at Fair Value on a Non-Recurring Basis

The Company's non-marketable equity, cost method investments, and non-financial assets, such as intangible assets, assets held for sale and property, plant and equipment, are recorded at fair value on a non-recurring basis. These assets are subject to fair value adjustments in certain circumstances, for example, when there is evidence of impairment.

The Company's non-marketable and cost method investments are monitored on a quarterly basis for impairment charges. The fair values of these investments have been determined as Level 3 fair value measurements because the valuations use unobservable inputs that require management's judgment due to the absence of quoted market prices. There were no impairment charges recognized on these investments during the year ended March 31, 2015. During the years ended March 31, 2014 and March 31, 2013, the Company recognized impairment charges of $0.7 million and $0.5 million, respectively, on these investments. These investments are included in other assets on the consolidated balance sheet.

The fair value measurements related to the Company's non-financial assets, such as intangible assets, assets held for sale and property, plant and equipment are based on available market prices at the measurement date based on transactions of similar assets and third-party independent appraisals, less cost to sell where appropriate. The Company classifies these measurements as Level 2.