Fair Value Measurements

9 Months Ended

Sep. 30, 2016

FAIR VALUE MEASUREMENTS

The Company’s financial assets and liabilities measured at fair value on a recurring basis were as follows:



	As of September 30, 2016
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Money market investments ⁽¹⁾	$	—	$	281,386	$	—	$	281,386
Commercial paper ⁽²⁾	90,835		—		—		90,835
Marketable equity securities ⁽³⁾	382,777		—		—		382,777
Other current investments ⁽⁴⁾	9,746		16,147		—		25,893
Interest rate swap ⁽⁵⁾	—		51		—		51
Total Financial Assets	$	483,358	$	297,584	$	—	$	780,942
Liabilities
Deferred compensation plan liabilities ⁽⁶⁾	$	—	$	45,431	$	—	$	45,431
Mandatorily redeemable noncontrolling interest ⁽⁷⁾	—		—		9,847		9,847
Total Financial Liabilities	$	—	$	45,431	$	9,847	$	55,278



	As of December 31, 2015
(in thousands)	Level 1		Level 2		Total
Assets
Money market investments ⁽¹⁾	$	—	$	433,040	$	433,040
Marketable equity securities ⁽³⁾	350,563		—		350,563
Other current investments ⁽⁴⁾	12,822		16,060		28,882
Total Financial Assets	$	363,385	$	449,100	$	812,485
Liabilities
Deferred compensation plan liabilities ⁽⁶⁾	$	—	$	48,055	$	48,055

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(1)	The Company’s money market investments are included in cash, cash equivalents and restricted cash and the value considers the liquidity of the counterparty.


(2)	The Company's commercial paper investments with original maturities of three months or less are included in cash and cash equivalents.


(3)	The Company’s investments in marketable equity securities are classified as available-for-sale.


(4)	Includes U.S. Government Securities, corporate bonds, mutual funds and time deposits. These investments are valued using a market approach based on the quoted market prices of the security or inputs that include quoted market prices for similar instruments and are classified as either Level 1 or Level 2 in the valuation hierarchy.


(5)	Included in Deferred charges and other assets. The fair value utilized a market approach model using the notional amount of the interest rate swap multiplied by the observable inputs of time to maturity and market interest rates.

(6)

Includes Graham Holdings Company's Deferred Compensation Plan and supplemental savings plan benefits under the Graham Holdings Company's Supplemental Executive Retirement Plan, which are included in accrued compensation and related benefits. These plans measure the market value of a participant's balance in a notional investment account that is comprised primarily of mutual funds, which are based on observable market prices. However, since the deferred compensation obligations are not exchanged in an active market, they are classified as Level 2 in the fair value hierarchy. Realized and unrealized gains (losses) on deferred compensation are included in operating income.


(7)	The fair value of the mandatorily redeemable noncontrolling interest is based on an EBITDA multiple, adjusted for working capital and other items, which approximates fair value.

In the third quarter of 2016, the Company recorded an impairment charge of $15.0 million to its preferred equity interest in a vocational school company due to a decline in business conditions. The measurement of the preferred equity interest is classified as a Level 3 fair value assessment due to the significance of unobservable inputs developed in the determination of the fair value. The Company used a discounted cash flow model to determine the estimated fair value of the preferred equity interest and made estimates and assumptions regarding future cash flows, discount rates, long-term growth rates and market values to determine the estimated fair value.

In the third quarter of 2015, the Company recorded a goodwill impairment charge of $248.6 million. In the second quarter of 2015, the Company recorded a long-lived asset impairment charge of $6.9 million. The remeasurements of the goodwill and other long-lived assets are classified as Level 3 fair value assessments due to the significance of unobservable inputs developed in the determination of the fair values. The Company used a discounted cash flow model to determine the estimated fair value of the reporting unit. A market value approach was also utilized to supplement the discounted cash flow model. The Company made estimates and assumptions regarding future cash flows, discount rates, long-term growth rates and market values to determine the reporting unit’s estimated fair value.

- 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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