FAIR VALUE OF CERTAIN FINANCIAL ASSETS AND LIABILITIES

12 Months Ended

Dec. 31, 2015

FAIR VALUE OF CERTAIN FINANCIAL ASSETS AND LIABILITIES

FAIR VALUE OF CERTAIN FINANCIAL ASSETS AND LIABILITIES

4.FAIR VALUE OF CERTAIN FINANCIAL ASSETS AND LIABILITIES

ASC 820 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. ASC 820 defines fair value as the price 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. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The three levels of inputs required by the standard that the Company uses to measure fair value are summarized below.

· Level 1: Quoted prices in active markets for identical assets or liabilities.

· Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

· Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

ASC 820 requires the use of observable market inputs (quoted market prices) when measuring fair value and requires a Level 1 quoted price to be used to measure fair value whenever possible.

The following tables present the Company’s held-to-maturity investments at amortized cost as well as the fair value of the Company’s financial assets that are recorded at fair value on a recurring basis, segregated among the appropriate levels within the fair value hierarchy at:

December 31, 2015	Level 1		Level 2			Level 3		Total
Cash	$	255,723	$	-		$	-	$	255,723
Money market funds	664,005		-			-		664,005
Certificates of deposit	-		85,007			-		85,007
Commercial paper	-		430,605			-		430,605
U.S. Treasuries	-		260,035			-		260,035
Municipal securities	-		731,744			-		731,744
U.S. government agency securities	-		508,256			-		508,256
Foreign currency derivatives	-		(217		)	-		(217		)
Total	$	919,728	$	2,015,430		$	-	$	2,935,158
Amounts included in:
Cash and cash equivalents	$	919,728	$	1,255,689		$	-	$	2,175,417
Short-term investments	-		744,610			-		744,610
Accounts receivable, net	-		371			-		371
Investments	-		15,348			-		15,348
Accrued liabilities	-		(588		)	-		(588		)
Total	$	919,728	$	2,015,430		$	-	$	2,935,158

December 31, 2014	Level 1		Level 2			Level 3		Total
Cash	$	196,090	$	-		$	-	$	196,090
Money market funds	106,928		-			-		106,928
Commercial paper	-		19,482			-		19,482
Municipal securities	-		854,787			-		854,787
U.S. government agency securities	-		9,199			-		9,199
Variable rate demand notes	-		4,001			-		4,001
Auction rate securities	-		-			3,910		3,910
Put option related to auction rate securities	-		-			250		250
Foreign currency derivatives	-		(252		)	-		(252		)
Total	$	303,018	$	887,217		$	4,160	$	1,194,395
Amounts included in:
Cash and cash equivalents	$	303,018	$	67,305		$	-	$	370,323
Short-term investments	-		777,224			3,910		781,134
Accounts receivable, net	-		83			-		83
Investments	-		42,940			-		42,940
Prepaid expenses and other current assets	-		-			250		250
Accrued liabilities	-		(335		)	-		(335		)
Total	$	303,018	$	887,217		$	4,160	$	1,194,395

The majority of the Company’s short-term investments are classified within Level 1 or Level 2 of the fair value hierarchy.  The Company’s valuation of its Level 1 investments, which include money market funds, is based on quoted market prices in active markets for identical securities. The Company’s valuation of its Level 2 investments, which include commercial paper, certificates of deposit, U.S. treasuries, municipal securities, U.S. government agency securities and VRDNs, is based on other observable inputs, specifically a market approach which utilizes valuation models, pricing systems, mathematical tools and other relevant information for the same or similar securities. The Company’s valuation of its Level 2 foreign exchange contracts is based on quoted market prices of the same or similar instruments, adjusted for counterparty risk. There were no transfers between Level 1 and Level 2 measurements during the years ended December 31, 2015 and 2014, and there were no changes in the Company’s valuation techniques.

The Company’s Level 3 assets were comprised of auction rate securities and put options. The Company’s Level 3 valuation utilized a mark-to-model approach which included estimates for interest rates, timing and amount of cash flows, credit and liquidity premiums, as well as expected holding periods for the auction rate securities. These assumptions are typically volatile and subject to change as the underlying data sources and market conditions evolve. A significant change in any single input could have a significant valuation impact; however, no single input has a more significant impact on valuation than another. There were no changes in the Company’s valuation techniques of its Level 3 assets during the year ended December 31, 2015.

The following table presents quantitative information related to the significant unobservable inputs utilized in the Company’s Level 3 recurring fair value measurements as of December 31, 2014.

	Valuation Technique	Unobservable Input	Range (Weighted-Average)
Auction Rate Securities	Discounted cash flow	Maximum rate probability	1.37%-3.02% (2.58%)
		Principal returned probability	84.78%-94.07% (87.05%)
		Default probability	4.56%-12.21% (10.37%)
		Liquidity risk	2.50%-2.50% (2.50%)
		Recovery rate	60-60 (60)
Put Options	Discounted cash flow	Counterparty risk	0.73%-0.79% (0.74%)

At December 31, 2015, the Company held no auction rate securities. At December 31, 2014, the Company held auction rate securities with a face value of $4.2 million (amortized cost basis of $3.9 million). A Level 3 valuation was performed on the Company’s auction rate securities as of December 31, 2014 resulting in a fair value of $3.9 million for the Company’s trading auction rate securities (after a $0.3 million impairment), which are included in short-term and long-term investments.

The following table provides a summary reconciliation of the Company’s financial assets that are recorded at fair value on a recurring basis using significant unobservable inputs (Level 3):

	December 31, 2015				December 31, 2014
	Auction Rate Securities		Put Options		Auction Rate Securities		Put Options
Opening Balance	$	3,910	$	250	$	16,184	$	1,092
Transfers into Level 3	-		-		-		-
Transfers out of Level 3	-		-		-		-
Total gains (losses) for the period:
Included in earnings	250		(250)		801		(842)
Included in other comprehensive income	-		-		-		-
Settlements	(4,160)		-		(13,075)		-
Closing Balance	$	-	$	-	$	3,910	$	250