Fair Value Measurements

12 Months Ended

Sep. 30, 2012

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The accounting guidance for fair value measurements and its subsequent updates establishes a three-tier fair value hierarchy, categorizing the inputs used to measure fair value.

The hierarchy can be described as follows:

• Level 1- observable inputs such as quoted prices in active markets;

• Level 2- inputs other than the quoted prices in active markets that are observable either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

• Level 3- unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Assets and liabilities recognized or disclosed at fair value in our consolidated financial statements on a nonrecurring basis include items such as property and equipment, equity and cost method investments, and other assets. These assets are measured at fair value if determined to be impaired. The fair values of these investments are determined based on valuation techniques using the best information available, and may include quoted market prices, market comparables, and discounted cash flow projections. An impairment charge is recorded when the cost of the investment exceeds its fair value and this condition is determined to be other-than-temporary.

Assets and Liabilities Measured at Fair Value on a Recurring Basis:

We have highly liquid investments classified as cash equivalents and short-term investments included in our consolidated balance sheets. Cash equivalents mainly consist of money market instruments and commercial paper that have original maturities of 90 days or less.

We also invest in financial instruments with maturities greater than 90 days but generally mature in less than one year. Such instruments are classified within Level 2 of the fair value hierarchy.

Our financial assets and liabilities measured at fair value as of September 30, 2012, are summarized below:

	Fair Value Measurement Using						Assets/Liabilities at Fair Value
	Level 1		Level 2		Level 3
Assets:
Cash equivalents (1):
Time deposits	$	45,323	$	—	$	—	$	45,323
Commercial paper	—		136,072		—		136,072
Other fixed income securities	—		7,074		—		7,074
Total cash equivalents	45,323		143,146		—		188,469
Short-term investments:
Commercial paper	—		86,963		—		86,963
Certificates of deposit	—		79,503		—		79,503
Other fixed income securities	—		34,596		—		34,596
Total short-term investments	—		201,062		—		201,062
Liabilities:
Acquisition-related contingent consideration	$	—	$	—	$	22,692	$	22,692

⁽¹⁾ Included in “cash and cash equivalents” in the consolidated balance sheets as of September 30, 2012, in addition to $113.8 million of cash.

Our financial assets and liabilities measured at fair value as of September 30, 2011, are summarized below:

	Fair Value Measurement Using						Assets/Liabilities at Fair Value
	Level 1		Level 2		Level 3
Assets:
Cash equivalents (1):
Time deposits	$	58,336	$	—	$	—	$	58,336
Commercial paper	—		184,970		—		184,970
Certificates of deposit	—		25,006		—		25,006
Total cash equivalents	58,336		209,976		—		268,312
Short-term investments:
Commercial paper	—		73,247		—		73,247
Certificates of deposit	—		87,447		—		87,447
Other fixed income securities	—		24,698		—		24,698
Total short-term investments	—		185,392		—		185,392
Liabilities:
Acquisition-related contingent consideration	$	—	$	—	$	33,490	$	33,490

⁽¹⁾ Included in “cash and cash equivalents” in the consolidated balance sheets as of September 30, 2011, in addition to $101.8 million of cash.

Our valuation techniques used to measure the fair values of our financial instruments that were classified as Level 1 in the table above were derived from quoted market prices as substantially all of these instruments have maturity dates (if any) within one year from our date of purchase and active markets for these instruments exist. Our valuation techniques used to measure the fair values of our financial instruments that were classified as Level 2 in the table above, generally all of which mature within one year and the counterparties to which have high credit ratings, were derived from the following: non-binding market consensus prices that are corroborated by observable market data and quoted market prices for similar instruments.

Acquisition-related Contingent Consideration

We estimate the fair value of acquisition-related contingent consideration using various valuation approaches including the Monte Carlo Simulation approach and discounted cash flow model. Acquisition-related contingent consideration liabilities are classified as Level 3 liabilities, because we use unobservable inputs to value them, reflecting our assessment of the assumptions market participants would use to value these liabilities. Changes in the fair value of contingent consideration are recorded as income or expense in the consolidated statements of operations.

Acquisition of TripIt

The fair value of the contingent consideration was estimated using the Monte Carlo simulation approach, which utilizes certain inputs that are unobservable in the market. Key inputs include the expected term, risk free rate, stock price, the volatility of our stock, and the strike price of $100.90. A volatility of 42% was used to calculate the fair value of our contingent consideration as of September 30, 2012. Volatility is considered a significant assumption and is based on our historical stock price. Additionally, the fair value of the contingent consideration is significantly impacted by the changes in our stock price. If the stock price increases (decreases) significantly, the fair value of the contingent consideration will decrease (increase) accordingly. The contingent consideration is included in the current acquisition-related contingent considerations on our consolidated balance sheets.

The following table presents a reconciliation of TripIt contingent consideration liability measured at fair value using significant unobservable inputs (Level 3):

Balance as of September 30, 2010	$	—
Contingent consideration issued at business combination	17,395
Total losses:
Recorded as revaluation of contingent consideration	4,034
Recorded as compensation expense	9,543
Balance as of September 30, 2011	30,972
Total gains:
Recorded as revaluation of contingent consideration	(7,884		)
Recorded as compensation expense	(396		)
Balance as of September 30, 2012	$	22,692

Acquisition of GlobalExpense

As part of the acquisition of GlobalExpense, we agreed to pay additional cash consideration, to the former GlobalExpense shareholders based on achievement of certain revenue targets through September 30, 2012.

The fair value of the contingent consideration was estimated by applying a probability based model, which utilizes significant inputs that are unobservable in the market. Key assumptions include our assessment of the weighted probability of achieving certain revenue targets through September 30, 2012 at each reporting period.

The following table presents a reconciliation of GlobalExpense contingent consideration measured at fair value using significant unobservable inputs (Level 3):

Balance as of September 30, 2010	$	—
Contingent consideration issued at business combination	2,584
Total gains:
Foreign currency translation	(66		)
Balance as of September 30, 2011	2,518
Total losses:
Recorded as revaluation of contingent consideration	610
Foreign currency translation	105
Consideration fully earned and recognized	(3,233		)
Balance as of September 30, 2012	$	—

As of September 30, 2012, we have determined the revenue targets have been met and recorded the full consideration amount in the consolidated balance sheet under acquisition-related liabilities.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

During 2012, fair value adjustments made to assets required to be measured at fair value on a nonrecurring basis were immaterial. In 2011 and 2010, there were no adjustments.

Other Fair Value Disclosures

The fair value of the Notes is estimated using Level 2 inputs based on quoted market prices in markets that are not active. The fair value of our senior convertible notes is primarily affected by our stock price and also subject to interest. As of September 30, 2012, the carrying amount and fair value of our senior convertible notes was $251.6 million and $438.0 million, respectively. As of September 30, 2011, the carrying amount and fair value of our senior convertible notes was $239.5 million and $291.3 million, respectively.