Fair Value Measurements

9 Months Ended

Sep. 30, 2013

Fair Value Measurements

Fair Value Measurements

Note 15—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 U.S. 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 U.S. government debt securities and treasury obligation money market mutual funds. Advent’s U.S. government debt securities are securities sponsored by the federal government of the United States.

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 its foreign government debt securities, corporate debt securities and certain of its U.S. government debt securities as having Level 2 inputs. Foreign debt securities primarily include Canadian bonds. The Company obtains the fair value of Level 2 financial instruments from its custody bank, which uses various professional pricing services to gather pricing data which may include quoted market prices for identical or comparable instruments, or inputs other than quoted prices that are observable either directly or indirectly. The custody bank then analyzes gathered pricing inputs and applies proprietary valuation techniques, such as consensus pricing, weighted average pricing, distribution-curve-based algorithms, or pricing models such as discounted cash flow techniques to provide the Company with a fair valuation of each security. The Company’s procedures include controls to ensure that appropriate fair values are recorded such as comparing prices obtained to independent sources. Advent reviews the internal controls in place at the custodian bank on an annual basis.

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, 2013 and December 31, 2012 (in thousands):

	Fair Value
	as of
	September 30, 2013		Level 1		Level 2		Level 3
Financial Assets:
Money market funds (1)	$	10,000	$	10,000	$	—	$	—
Financial Liabilities:
Debt (5)	$	350,000	$	—	$	350,000	$	—

	Fair Value
	as of
	December 31, 2012		Level 1		Level 2		Level 3
Financial Assets:
Money market funds (1)	$	47,086	$	47,086	$	—	$	—
U.S. government debt securities (3)	$	59,815	$	55,817	$	3,998	$	—
Corporate debt securities (3)	$	110,508	$	—	$	110,508	$	—
Foreign government debt securities (2)	$	2,421	$	—	$	2,421	$	—
Financial Liabilities:
Debt (5)	$	95,000	$	—	$	95,000	$	—

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

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

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

(4) Included in cash and cash equivalents, short-term and long-term marketable securities in the Company’s condensed consolidated balance sheet.

(5) Included in current portion of long-term debt and long-term debt in the Company’s condensed consolidated balance sheet.

There were no transfers between Level 1 and Level 2 assets during the nine months ended September 30, 2013 and Advent does not have any significant assets or liabilities that utilize unobservable or Level 3 inputs.

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

The carrying amount of debt approximates fair value as the underlying variable interest rate approximates current market rates and the Company’s credit risk has not changed significantly since the date of issuance.