Fair Value Measurements

9 Months Ended

Sep. 30, 2011

Fair Value Measurements

Fair Value Measurements

Note 16—Fair Value Measurements

The accounting guidance for fair value measurements establishes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

Level Input	Input Definition
Level 1	Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2	Inputs other than quoted prices included within Level 1 that are observable for the asset or liability through corroboration with market data at the measurement date.
Level 3	Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

In general, and where applicable, the Company uses quoted prices in active markets for identical assets or liabilities to determine fair value. The Company applied this valuation technique to measure the fair value of the Company’s Level 1 investments, such as treasury obligation money market mutual funds and US and foreign government debt securities. Money market funds consist of cash equivalents with remaining maturities of three months or less at the date of purchase and are composed primarily of US government debt securities and treasury obligation money market mutual funds. Advent’s US government debt securities are securities sponsored by the federal government.

If quoted prices in active markets for identical assets or liabilities are not available to determine fair value, then the Company uses quoted prices for similar assets and liabilities or inputs other than the quoted prices that are observable either directly or indirectly. The Company classifies a portion of its foreign government debt securities and corporate debt securities as having Level 2 inputs. These corporate debt securities are guaranteed by the US government. Foreign debt securities primarily include Swedish bonds. The valuation techniques used to measure the fair value of the Company’s financial instruments having Level 2 inputs were derived from non-binding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricing models, such as discounted cash flow techniques and incorporate non-performance risk of the counterparty. The Company’s procedures include controls to ensure that appropriate fair values are recorded such as comparing prices obtained from multiple independent sources.

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including available-for-sale securities. The fair value of these certain financial assets was determined using the following inputs as of September 30, 2011 (in thousands):

	Fair Value Measurements at Reporting Date Using
					Significant
			Quoted Prices in		Other		Significant
			Active Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets
Money market funds (1)	$	18,024	$	18,024	$	—	$	—
US government debt securities (2)	9,119		9,119		—		—
Foreign government debt securities (2)	5,938		2,311		3,627		—
Corporate debt securities (3)	7,524		—		7,524		—
Total	$	40,605	$	29,454	$	11,151	$	—

(1)   Included in cash and cash equivalents on the Company’s condensed consolidated balance sheet.

(2)   Included in short-term marketable securities on the Company’s condensed consolidated balance sheet.

(3)   Included in short-term and long-term marketable securities on the Company’s condensed consolidated balance sheet.

There were no material transfers between Level 1 and Level 2 assets during the nine months ended September 30, 2011 and the Company does not have any significant assets that utilize unobservable or Level 3 inputs.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value based on the short-term maturities of these instruments.

The Company also has a direct investment in a privately-held company accounted for under the cost method which is not reported in the table of assets measured at fair value above. This investment is periodically assessed for other-than-temporary impairment. At December 31, 2010, the Company’s net investment in a privately-held company totaled $0.5 million. In the third quarter of 2011, the Company reassessed the carrying value of its investment in the privately held company. Based on events affecting the financial condition of the privately held company during the third quarter of 2011, the Company concluded that the value of the investment had declined to the degree of other than temporary impairment, and as a result, the Company recorded an impairment loss on the investment of $0.5 million to fully write off the carrying value.