FAIR VALUE MEASUREMENTS

Accounting rules for fair value clarify 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.

Derivatives

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 assets. The Level 2 derivative assets are primarily valued using standard calculations and models that use readily observable market data as their basis.

Assets Measured at Fair Value on a Recurring Basis

Assets measured at fair value on a recurring basis at March 31, 2016 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
Cash and cash equivalents:
Money market mutual funds	$	1,787,446	$	—	$	—	$	1,787,446
Deposit accounts	—		305,305		—		305,305
Short-term investments:
Marketable equity securities	2,203		—		—		2,203
Corporate bonds and debt	—		1,000		—		1,000
Government agency bonds	—		350,081		—		350,081
Long-term investments:
Government agency bonds	—		118,549		—		118,549
Total assets measured at fair value	$	1,789,649	$	774,935	$	—	$	2,564,584

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
Cash and cash equivalents:
Money market mutual funds	$	279,833	$	—	$	—	$	279,833
Deposit accounts	—		327,982		—		327,982
Short-term investments:
Marketable equity securities	13,166		—		—		13,166
Corporate bonds and debt	—		756,664		—		756,664
Time deposits ⁽¹⁾	—		506		—		506
Government agency bonds	—		549,737		—		549,737
Municipal bonds	—		30,981		—		30,981
Long-term investments:
Corporate bonds and debt	—		164,075		6,190		170,265
Government agency bonds	—		192,519		—		192,519
Municipal bonds	—		10,717		—		10,717
Auction rate securities	—		—		9,825		9,825
Other assets
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.

There were no transfers between Level 1 and Level 2 during fiscal 2016 or fiscal 2015.

The following table presents a reconciliation for all assets measured at fair value on a recurring basis, excluding accrued interest components, using significant unobservable inputs (Level 3) for the year ended March 31, 2016. 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, 2016	Auction Rate Securities			Corporate Debt			Total Gains (Losses)
Balance at March 31, 2015	$	9,825		$	6,190		$	—
Total gains (losses) (realized):
Included in earnings	2,780			(3,995		)	(1,215		)
Purchases, sales, issuances, and settlements, net	(12,605		)	—			—
Transfers out of Level 3	—			(2,195		)	—
Balance at March 31, 2016	$	—		$	—		$	(1,215	)

Transfers into or out of Level 3 are made if the inputs used in the financial models measuring the fair values of the assets became unobservable or observable, respectively, in the current marketplace. During the year ended March 31, 2016, the Company transferred $2.2 million of corporate debt assets out of Level 3 as the inputs used to value these assets became observable in the current marketplace and are classified as Level 1 as of March 31, 2016. This transfer was effective on October 26, 2015.

During the fourth quarter of fiscal 2016, the Company sold its ARS for proceeds of $12.6 million. At March 31, 2015, the Company's ARS for which auctions were unsuccessful were made up of securities related to the insurance industry valued at $9.8 million with a par value of $22.4 million. During the period the Company held the ARS, the Company estimated the fair value of its ARS, which were 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 were estimated risk free discount rates, liquidity risk premium, and the liquidity horizon. The risk free discount rate applied to these securities was 2.0% 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.

Gains and losses recognized in earnings are credited or charged to other income (expense) on the consolidated statements of income.

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 years ended March 31, 2016 or March 31, 2015. During the year ended March 31, 2014, the Company recognized impairment charges of $0.7 million on these investments. These investments are included in other assets on the consolidated balance sheets.

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 costs to sell where appropriate. The Company classifies these measurements as Level 2.