Fair Value Measurements

3 Months Ended

Nov. 30, 2014

We measure and disclose certain financial instruments at fair value as described in Note 4, Financial Instruments. Liabilities measured at fair value on a recurring basis, all of which are included in other liabilities on our Condensed Consolidated Balance Sheets, consist of the following as of November 30, 2014 and August 31, 2014:



			Fair Value Measurements at Reporting Dates Using
	Fair Value as of Respective Reporting Dates		Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
($ in thousands)	Fair Value as of Respective Reporting Dates				Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Contingent consideration as of November 30, 2014	$	6,292	$	—	$	—	$	6,292
Contingent consideration as of August 31, 2014	$	41,893	$	—	$	—	$	41,893

The following summarizes changes in liabilities measured at fair value on a recurring basis for the respective periods:



	Three Months Ended November 30,
($ in thousands)	2014			2013
Beginning balance	$	41,893		$	5,277
Change in fair value included in net income	(1,121		)	466
Payment for contingent consideration	(34,480		)	—
Ending balance	$	6,292		$	5,743

Our contingent consideration liabilities are classified within Level 3 and valued using discounted cash flow valuation methods encompassing significant unobservable inputs. The inputs include estimated operating results scenarios for the applicable performance periods, probability weightings assigned to operating results scenarios and the discount rates applied. Our contingent consideration liabilities relate to the following:

•

Open Colleges - As a result of our acquisition of Open Colleges during fiscal year 2014, we had contingent consideration that was based on Open Colleges’ operating results through June 2014, as defined in the acquisition agreement. We initially measured the contingent consideration at $21.4 million based on information available as of the acquisition date. During the first quarter of fiscal year 2015, we settled the contingent consideration and paid $34.5 million, which includes $21.4 million in financing activities and the remaining portion is included in operating activities on our Condensed Consolidated Statements of Cash Flows.


•	Apollo Global - As a result of our purchase of the noncontrolling interest in Apollo Global during fiscal year 2013, we have contingent consideration that is based on a portion of Apollo Global’s operating results through the fiscal years ending August 31, 2017. As of November 30, 2014, the estimated fair value for this contingent consideration was $6.3 million.

We did not change our valuation techniques associated with recurring fair value measurements from prior periods.

- 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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