Fair Value Measurements

9 Months Ended

Sep. 30, 2015

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There are three levels of inputs that may be used to measure fair value, which are as follows:

Level 1 – Observable inputs, such as quoted market prices for identical assets and liabilities in active public markets.

Level 2 – Observable inputs other than Level 1 prices based on quoted prices in markets with insufficient volume or infrequent transactions, or valuations in which all significant inputs are observable for substantially the full term of the asset or liability.

Level 3 – Unobservable inputs to the valuation techniques that are significant to the fair value of the asset or liability.

Assets and liabilities are measured at fair value based on one or more of the following three valuation techniques:

Market Approach – Fair value is determined based on prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities.

Income Approach – Fair value is determined by converting relevant future amounts to a single present amount based on market expectations (including present value techniques and option pricing models).

Cost Approach – Fair value represents the amount that currently would be required to replace the service capacity of the relevant asset (often referred to as replacement cost).

The fair value hierarchy of Actua’s financial assets measured at fair value on a recurring basis as of September 30, 2015 and December 31, 2014 was as follows (in thousands):



				Valuation
	Asset (liability) at			Technique
	September 30, 2015			(Approach)	Level 1		Level 2		Level 3
Cash equivalents (money market accounts)	$	69,789		Market	$	69,789	$	—	$	—
Acquisition contingent consideration obligations	(1,799		)	Income	—		—		(1,799		)
	$	67,990			$	69,789	$	—	$	(1,799	)

				Valuation
	Asset (liability) at			Technique
	December 31, 2014			(Approach)	Level 1		Level 2		Level 3
Cash equivalents (money market accounts)	$	77,935		Market	$	77,935	$	—	$	—
Acquisition contingent consideration obligations	(3,088		)	Income	—		—		(3,088		)
	$	74,847			$	77,935	$	—	$	(3,088	)

As of September 30, 2015, Actua accounts for a contingent earn-out payment related to VelocityEHS’ acquisition of KMI, which was a component of VelocityEHS’ purchase price for KMI. That obligation was fair valued on the date of acquisition using Monte Carlo simulation models that yielded a value of $1.2 million. The obligation could range in value from zero to $2.0 million; the fair value as of September 30, 2015 has been determined through the update of models, Actua’s calculations and/or qualitative analysis. The contingent obligation related to VelocityEHS’ acquisition of KMI will become due, if at all, in June 2016 and has been classified as a short-term liability on Actua’s Consolidated Balance Sheets as of September 30, 2015 and as a long term liability as of December 31, 2014.

As of December 31, 2014, Actua accounted for three contingent consideration obligations. Those obligations consisted of the earn-out payment related to VelocityEHS’ KMI acquisition, and two contingent obligations related to acquisitions made by FolioDynamix prior to Actua’s acquisition of FolioDynamix. The two contingent obligations related to FolioDynamix were also fair valued on the respective dates of acquisition using Monte Carlo simulation models that yielded an aggregate value of $1.9 million of obligations. Both contingent consideration obligations related to FolioDynamix’s acquisitions were settled during the second quarter of 2015, and the portion of those payments that represent the initial fair value of the contingent obligations determined as of the acquisition date ($1.9 million) are reflected as cash used in financing activities, with the excess ($0.1 million) reflected as cash used in operating activities, on Actua’s Consolidated Statements of Cash Flows for the nine months ended September 30, 2015.

During the three and nine months ended September 30, 2015, contingent consideration obligations increased by $0.2 million and $0.7 million, respectively, primarily related to the KMI acquisition. These increases are reflected as charges on the "Impairment related and other" line item on Actua's Consolidated Statements of Operations.

- 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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