Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. Valuation techniques must maximize the use of observable inputs and minimize the use of unobservable inputs. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.

The determination of the applicable level within the hierarchy of a particular financial asset or liability depends on the lowest level of inputs that are significant to the fair value measurement as of the measurement date as follows:


•	Level 1: Quoted prices for identical assets or liabilities in active markets.


•	Level 2: Observable inputs other than those described as Level 1.


•	Level 3: Unobservable inputs that are supportable by little or no market activities and are based on significant assumptions and estimates.

Assets and liabilities measured at fair value on a recurring basis at December 31, 2018 and September 30, 2018 consisted of the following (dollars in thousands):



	December 31, 2018
	Level 1		Level 2			Level 3			Total
Assets:
Money market funds^(a)	$	185,713	$	—		$	—		$	185,713
Time deposits^(b)	—		97,743			—			97,743
Commercial paper, $20,176 at cost^(b)	—		20,287			—			20,287
Corporate notes and bonds, $58,308 at cost^(b)	—		58,153			—			58,153
Foreign currency exchange contracts^(b)	—		463			—			463
Total assets at fair value	$	185,713	$	176,646		$	—		$	362,359
Liabilities:
Foreign currency exchange contracts^(b)	$	—	$	(130	)	$	—		$	(130	)
Contingent acquisition payments^(c)	—		—			(3,979		)	(3,979		)
Total liabilities at fair value	$	—	$	(130	)	$	(3,979	)	$	(4,109	)



	September 30, 2018
	Level 1		Level 2			Level 3			Total
Assets:
Money market funds^(a)	$	200,004	$	—		$	—		$	200,004
Time deposits^(b)	—		88,158			—			88,158
Commercial paper, $27,194 at cost^(b)	—		27,363			—			27,363
Corporate notes and bonds, $57,563 at cost^(b)	—		57,417			—			57,417
Foreign currency exchange contracts^(b)	—		143			—			143
Total assets at fair value	$	200,004	$	173,081		$	—		$	373,085
Liabilities:
Foreign currency exchange contracts^(b)	$	—	$	(1,192	)	$	—		$	(1,192	)
Contingent acquisition payments^(c)	—		—			(4,000		)	(4,000		)
Total liabilities at fair value	$	—	$	(1,192	)	$	(4,000	)	$	(5,192	)


^(a)	Money market funds and time deposits with original maturity of 90 days or less are included within cash and cash equivalents in the consolidated balance sheets and are valued at quoted market prices in active markets.

^(b)

Time deposits, commercial paper, corporate notes and bonds, and foreign currency exchange contracts are recorded at fair market values, which are determined based on the most recent observable inputs for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active or are directly or indirectly observable. Time deposits are generally for terms of one year or less. Commercial paper and corporate notes and bonds generally mature within three years and had a weighted average maturity of 0.51 years as of December 31, 2018 and 0.61 years as of September 30, 2018.


^(c)	The fair values of our contingent consideration arrangements were determined using either the option pricing model with Monte Carlo simulation or the probability-weighted discounted cash flow method.

The estimated fair value of our long-term debt was approximately $2,271.4 million (face value $2,437.0 million) as of December 31, 2018 and $2,423.6 million (face value $2,437.0 million) as of September 30, 2018 based on Level 2 measurements. The fair value of each borrowing was estimated using the average of the bid and ask trading quotes at each respective reporting date. There was no balance outstanding under our revolving credit agreement as of December 31, 2018 or September 30, 2018.

Additionally, contingent acquisition payments are recorded at fair values upon the acquisition, and remeasured in subsequent reporting periods with the changes in fair values recorded within acquisition-related costs, net. Such payments are contingent upon the achievement of specified performance targets and are valued using the option pricing model with Monte Carlo simulation or the probability-weighted discounted cash flow model.

The following table provides a summary of changes in the aggregate fair value of the contingent acquisition payments for all periods presented (dollars in thousands):



	Three Months Ended December 31,
	2018			2017
Balance at beginning of period	$	4,000		$	8,648
Earn-out liabilities established at time of acquisition	—			500
Payments and foreign currency translation	(21		)	(17		)
Adjustments to fair value included in acquisition-related costs, net	—			1,300
Balance at end of period	$	3,979		$	10,431

Contingent acquisition payments are to be made in periods through fiscal year 2021. As of December 31, 2018, the maximum amount payable based on the agreements was $11.7 million if the specified performance targets are achieved.