Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2014

3.	Fair Value of Financial Instruments

Cash and Cash Equivalents

The Company considers all highly liquid investments with a remaining maturity at the date of purchase of 90 days or less to be cash equivalents. At March 31, 2014 and December 31, 2013, substantially all cash equivalents were U.S. treasury bills and amounts held in money market accounts at commercial banks.

Investments

All of the Company’s investments were classified as available-for-sale at March 31, 2014 and December 31, 2013. The principal amounts of short-term investments are summarized in the tables below:


	Less Than 12 Months to Maturity
	Amortized Cost		Unrealized Gains		Unrealized Gains (Losses)			Fair Value
Balance at March 31, 2014:
U.S. Treasury securities	$	422,858	$	—	$	29		$	422,887

Total	$	422,858	$	—	$	29		$	422,887
Balance at December 31, 2013:
U.S. Treasury securities	$	346,618	$	—	$	(22	)	$	346,596

Total	$	346,618	$	—	$	(22	)	$	346,596

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2014:


	March 31, 2014		Quoted Price in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents
Money market fund	$	111,778	$	111,778	$	—	$	—
US treasury securities	$	29,009	$	—	$	29,009	$	—
Marketable securities
US treasury securities	$	422,887	$	—	$	422,887	$	—

Total	$	563,674	$	111,778	$	451,896	$	—

Level 1 inputs are quoted prices in active markets for identical assets or liabilities and consist of cash and money market funds. Items classified as Level 2 within the valuation hierarchy consist of U.S. government-related debt securities. We estimate the fair values of these marketable securities by taking into consideration valuations obtained from third-party pricing sources. These pricing sources utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include market pricing based on real-time trade data for the same or similar securities, issuer credit spreads, benchmark yields, and other observable inputs. We validate the prices provided by our third-party pricing sources by understanding the models used, obtaining market values from other pricing sources and analyzing pricing data in certain instances.

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2013:


	December 31, 2013		Quoted Price in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents
Money market fund	$	27,899	$	27,899	$	—	$	—
US treasury securities	$	21,021	$	—	$	21,021	$	—
Marketable securities
US treasury securities	$	346,596	$	—	$	346,596	$	—

Total	$	395,516	$	27,899	$	367,617	$	—

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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