The accounting guidance on fair value measurements defines fair value, establishes a framework for measuring fair value under U.S. GAAP, and expands disclosures about fair value measurements. The guidance is applicable for all financial assets and financial liabilities and for all nonfinancial assets and nonfinancial liabilities recognized or disclosed at fair value in the consolidated financial statements on a recurring basis. Fair value is defined as the exchange price that would be received from selling an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and also considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions and risk of nonperformance.

Accounting guidance on fair value measurements requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1 — Quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities 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 asset or liability.

The Company’s Level 2 assets as of September 30, 2019 and 2018 consisted of money market funds, commercial paper instruments and corporate bond securities. Fair market values for these assets are based on quoted vendor prices and broker pricing where all significant inputs are observable. To ensure the accuracy of quoted vendor prices and broker pricing, the Company performs regular reviews of investment returns to industry benchmarks and sample tests of individual securities to validate quoted vendor prices with other available market data.

Level 3 — Unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation.

Included in Level 3 liabilities as of September 30, 2019 is a $3.2 million contingent consideration liability, all of which is current. Included in Level 3 liabilities as of September 30, 2018 is a $14.5 million contingent consideration liability, of which $3.4 million is noncurrent. The current contingent consideration liabilities represents the liabilities for revenue and strategic milestones achieved during a contingency periods which ended September 30, 2019 and 2018, respectively. The non-current contingent consideration liabilities are subject to achievement of revenue and value-creating milestones in the period ending September 30, 2019. There were no Level 3 assets as of September 30, 2019 and 2018.

In valuing assets and liabilities, the Company is required to maximize the use of quoted market prices and minimize the use of unobservable inputs. The Company did not significantly change its valuation techniques from prior periods. The carrying value of cash, accounts receivable, accounts payable and accrued liabilities approximates fair value as of September 30, 2019 and 2018 due to the short maturity nature of these instruments.

In instances where the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2019 (in thousands):

	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Fair Value as of September 30, 2019
Assets
Cash equivalents	$	—	$	24,375	$	—		$	24,375
Available-for-sale securities		—		24,931		—		$	24,931
Total assets	$	—	$	49,306	$	—		$	49,306

Liabilities
Contingent consideration	$	—	$	—	$	(3,200	)	$	(3,200	)
Total liabilities	$	—	$	—	$	(3,200	)	$	(3,200	)

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2018 (in thousands):

	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Fair Value as of September 30, 2018
Assets
Cash equivalents	$	—	$	13,999	$	—		$	13,999
Available-for-sale securities		—		41,352		—		$	41,352
Total assets	$	—	$	55,351	$	—		$	55,351

Liabilities
Contingent consideration	$	—	$	—	$	(14,466	)	$	(14,466	)
Total liabilities	$	—	$	—	$	(14,466	)	$	(14,466	)

The following table summarizes the changes in the contingent consideration liability for the years ended September 30, 2019 and 2018:

(Dollars in thousands)
Contingent consideration liability at September 30, 2017	$	14,864
Additions		—
Fair value adjustments		288
Settlements		(925	)
Interest accretion		387
Foreign currency translation		(148	)
Contingent consideration liability at September 30, 2018		14,466
Additions		—
Fair value adjustments		(415	)
Settlements		(10,979	)
Interest accretion		254
Foreign currency translation		(126	)
Contingent consideration liability at September 30, 2019	$	3,200

There were no transfers of assets or liabilities to or from amounts measured using Level 3 fair value measurements during fiscal 2019 or 2018.

The valuation techniques used to measure the fair value of assets are as follows:

Cash equivalents — These assets are classified as Level 2 and are carried at historical cost which is a reasonable estimate of fair value because of the relatively short time between origination of the instrument and its expected realization.

Available-for-sale securities — These assets are classified as Level 2 and include commercial paper instruments and corporate bonds. These securities are valued based on quoted vendor prices in active markets underlying the securities.

Contingent consideration — The contingent consideration liabilities were determined based on discounted cash flow analyses that included revenue estimates, probability of strategic milestone achievement and a discount rate, which are considered significant unobservable inputs as of the acquisition dates and September 30, 2019 and 2018. The contingency period for the NorMedix acquisition ended September 30, 2019. Based on the milestones achieved during the contingency period, the Company expects to pay the NorMedix shareholders $3.2 million in December 2019, based on the achievement of milestones throughout the contingency period. The contingency period for the Creagh Medical contingent consideration obligation ended September 30, 2018. Based on the milestones achieved during the contingency period, the Company paid Creagh Medical shareholders $11.0 million in December 2018. The Creagh Medical obligation was discounted using the Company’s annualized cost of debt for the three-month period between September 30, 2019 and the expected settlement date, or 2.3%. Probability of completion for the redefined milestones was reflected in the estimated fair value of the NorMedix contingent consideration obligation as of September 30, 2018. For the revenue-based milestones, the Company discounted forecasted revenue by 20.5%, which represents the Company’s weighted average cost of capital for the transaction, adjusted for the short-term nature of the cash flows. The resulting present value of revenue was used as an input into an option pricing approach, which also considered the Company’s risk of non-payment of the revenue-based milestones. Outstanding strategic milestones were projected to have a 5% to 95% probability of achievement as of September 30, 2018, and related payments were discounted using the Company’s estimated cost of debt for the remaining contingency period, or 6.0%.

The €9.6 million (approximately $11.0 million as of September 30, 2018) contingent consideration related to the Creagh Medical acquisition was denominated in Euros and was not hedged. The Company recorded foreign currency gains (losses) of $0.1 million, $0.1 million and ($0.5) million, respectively, in the years ended September 30, 2019, 2018 and 2017, respectively, related to this contingent consideration obligation as it was marked to year-end exchange rates.

The Company’s investments in non-marketable securities of private companies are accounted for using the cost method as the Company does not exert significant influence over the investees’ operating or financial activities. These investments are measured at fair value on a non-recurring basis when they are deemed to be other-than-temporarily impaired. In determining whether a decline in value of non-marketable equity investments in private companies has occurred and is other-than-temporary, an assessment is made by considering available evidence, including the general market conditions in the investee’s industry, the investee’s product development status and subsequent rounds of financing and the related valuation and/or the Company’s participation in such financings. The Company also assesses the investee’s ability to meet business milestones and the financial condition and near-term prospects of the individual investee, including the rate at which the investee is using its cash and the investee’s need for possible additional funding at a potentially lower valuation. The valuation methodology for determining the decline in value of non-marketable equity securities is based on inputs that require management judgment and are Level 3 inputs.