Financial Instruments

12 Months Ended

Dec. 31, 2014

8. Financial Instruments

Fair Value Measurements

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 was as follows (in thousands):

	Asset at		Valuation Technique
	December 31, 2014		(Approach)	Level 1		Level 2		Level 3
Cash equivalents (money market accounts)	$	77,935	Market	$	77,935	$	-	$	-
	$	77,935		$	77,935	$	-	$	-

	Liability at		Valuation Technique
	December 31, 2014		(Approach)	Level 1		Level 2		Level 3
Acquisition Contingent Consideration Obligations	$	3,320	Income	$	-	$	-	$	3,320
	$	3,320		$	-	$	-	$	3,320

	Asset at		Valuation Technique
	December 31, 2013		(Approach)	Level 1		Level 2		Level 3
Cash equivalents (money market accounts and commercial paper investments)	$	325,652	Market	$	325,652	$	-	$	-
	$	325,652		$	325,652	$	-	$	-

During the year ended December 31, 2014, three contingent consideration obligations occurred for Actua. One was in relation to MSDSonline’s acquisition of KMI where a contingent consideration obligation, in the form of an earn-out, was a component of the MSDSonline’s purchase price for KMI. Two were in relation to Actua’s acquisition of FolioDynamix where Actua inherited two legacy contingent consideration obligations from prior acquisitions of FolioDynamix. In aggregate, these three obligations were fair valued on respective dates of acquisitions using monte carlo simulation models that produced results that totaled $3.3 million. Although the range of these contingent consideration obligations could range from $1.5 million to $5.5 million, there has been little change in value through December 31, 2014, with a value still approximating $3.3 million. Two of these contingent consideration obligations are short term as they will expire in 2015 and one is long term as it will expire in 2016.

During the year ended December 31, 2012, GovDelivery determined that the estimated fair value of its acquisition contingent consideration obligations had changed with respect to a prior acquisition. The contingent consideration liability had an estimated fair value of $0.7 million, which was determined at the acquisition date, and was written down to the current estimated fair value of zero which resulted in a gain of $0.7 million that is included in “Impairment related and other” on Actua’s Consolidated Statements of Operations. In conjunction with this determination, GovDelivery also performed an impairment analysis of intangible assets and goodwill that were recorded related to the acquisition. See Note 3, “Goodwill and Intangibles, net.”

The carrying value of certain of Actua’s other financial instruments, including accounts receivable and accounts payable approximates fair value due to the short-term nature of those instruments. The fair value of Actua’s long-term debt is based on assumptions concerning the amount and timing of estimated future cash flows and assumed risk-adjusted discount rates. See Note 9, “Debt” for further discussion. Actua’s non-financial assets measured on a non-recurring basis using the market approach were as follows (in thousands):

	As of December 31,
	2014		2013
Significant unobservable inputs (Level 3):
Goodwill (annual impairment assessment)	$	264,186	$	90,466
Acquired intangible assets (periodic assessment, as necessary)		102,325		58,755
	$	366,511	$	149,221

- 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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