Fair Value Measurements

12 Months Ended

Sep. 30, 2014

In accordance with the authoritative guidance on fair value measurements and disclosure under GAAP, the Company determines fair value using a fair value hierarchy that distinguishes between market participant assumptions developed based on market data obtained from sources independent of the reporting entity, and the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances and expands disclosure about fair value measurements.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date, essentially the exit price.

The levels of fair value hierarchy are:

Level 1: Quoted prices in active markets for identical assets and liabilities at the measurement date that the Company has the ability to access.

Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Unobservable inputs for which there is little or no market data available. These inputs reflect management’s assumptions of what market participants would use in pricing the asset or liability.

Level 1 investments are valued based on quoted market prices in active markets and include the Company’s cash equivalent investments. Level 2 investments, which include investments that are valued based on quoted prices in markets that are not active, broker or dealer quotations, actual trade data, benchmark yields or alternative pricing sources with reasonable levels of price transparency, include the Company’s certificates of deposit, corporate bonds and notes, municipal bonds and notes, U.S. government securities, U.S. government agency securities and international government securities. Fair values for the Company’s level 2 investments are based on similar assets without applying significant judgments. In addition, all of the Company’s level 2 investments have a sufficient level of trading volume to demonstrate that the fair values used are appropriate for these investments.

A financial instrument’s level within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Company. The Company considers observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

The Company’s financial assets measured at fair value on a recurring basis subject to the disclosure requirements at September 30, 2014, were as follows (in thousands):



	Fair Value Measurements at Reporting Date Using						Fair Value at September 30, 2014
	Quoted Prices in Active Markets for Identical Securities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value at September 30, 2014
Cash equivalents	$	43,618	$	—	$	—	$	43,618
Short-term investments
Available-for-sale securities — corporate bonds and notes	—		205,698		—		205,698
Available-for-sale securities — municipal bonds and notes	—		43,430		—		43,430
Available-for-sale securities — U.S. government securities	—		5,006		—		5,006
Available-for-sale securities — U.S. government agency securities	—		109,743		—		109,743
Long-term investments
Available-for-sale securities — corporate bonds and notes	—		325,282		—		325,282
Available-for-sale securities — municipal bonds and notes	—		24,582		—		24,582
Available-for-sale securities — U.S. government securities	—		7,407		—		7,407
Available-for-sale securities — U.S. government agency securities	—		123,087		—		123,087
Available-for-sale securities — international government securities	—		2,559		—		2,559
Total	$	43,618	$	846,794	$	—	$	890,412

The Company’s financial assets measured at fair value on a recurring basis subject to the disclosure requirements at September 30, 2013, were as follows (in thousands):



	Fair Value Measurements at Reporting Date Using						Fair Value at September 30, 2013
	Quoted Prices in Active Markets for Identical Securities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value at September 30, 2013
Cash equivalents	$	13,145	$	—	$	—	$	13,145
Short-term investments
Available-for-sale securities — corporate bonds and notes	—		125,212		—		125,212
Available-for-sale securities — municipal bonds and notes	—		72,164		—		72,164
Available-for-sale securities — U.S. government securities	—		5,000		—		5,000
Available-for-sale securities — U.S. government agency securities	—		150,074		—		150,074
Long-term investments
Available-for-sale securities — corporate bonds and notes	—		260,318		—		260,318
Available-for-sale securities — municipal bonds and notes	—		24,371		—		24,371
Available-for-sale securities — U.S. government securities	—		14,798		—		14,798
Available-for-sale securities — U.S. government agency securities	—		426,458		—		426,458
Available-for-sale securities — auction rate securities	—		—		3,036		3,036
Total	$	13,145	$	1,078,395	$	3,036	$	1,094,576

The following table provides a reconciliation between the beginning and ending balances of items measured at fair value on a recurring basis in the tables above that used significant unobservable inputs (Level 3) (in thousands):



	2014			2013
Balance, beginning of period	$	3,036		$	4,750
Total gains (losses) realized or unrealized:
Included in other comprehensive income	264			(14		)
Settlements	(3,300		)	(1,700		)
Balance, end of period	$	—		$	3,036
Unrealized losses attributable to assets still held as of the end of the period	—			(14		)

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable or there is limited market activity such that the determination of fair value requires significant judgment or estimation.

The Company uses the fair value hierarchy for financial assets and liabilities. The Company’s non-financial assets and liabilities, which include goodwill, intangible assets, and long-lived assets, are not required to be carried at fair value on a recurring basis. These non-financial assets and liabilities are measured at fair value on a non-recurring basis when there is an indicator of impairment, and they are recorded at fair value only when impairment is recognized. The Company reviews goodwill and intangible assets for impairment annually, during the second quarter of each fiscal year, or as circumstances indicate the possibility of impairment. The Company monitors the carrying value of long-lived assets for impairment whenever events or changes in circumstances indicate its carrying amount may not be recoverable. During the year ended September 30, 2014, the Company did not recognize any impairment charges related to goodwill, intangible assets, or long-lived assets.

- 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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