Note 2. Marketable Securities and Fair Value Measurements

As of September 30, 2016 and December 31, 2015, the estimated fair value of our short-term and long-term marketable securities, classified as available for sale, are as follows (in thousands):

Short-term



September 30, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Commercial paper	$	19,029	$	—	$	—		$	19,029
Corporate bonds	81,955		18		(29		)	81,944
Municipal securities	9,205		—		(4		)	9,201
U.S. government agency bonds	30,587		24		—			30,611
U.S. government treasury bonds	47,702		31		—			47,733
Certificates of deposits	4,500		—		—			4,500
Total Marketable Securities, Short-Term	$	192,978	$	73	$	(33	)	$	193,018

Long-term



September 30, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government agency bonds	$	9,249	$	11	$	—		$	9,260
Corporate bonds	43,101		118		(7		)	43,212
U.S. government treasury bonds	10,027		21		—			10,048
Asset-backed securities	300		—		—			300
Total Marketable Securities, Long-Term	$	62,677	$	150	$	(7	)	$	62,820

Short-term



December 31, 2015	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Commercial paper	$	38,537	$	—	$	—		$	38,537
Corporate bonds	179,765		6		(251		)	179,520
U.S. dollar denominated foreign corporate bonds	510		—		(2		)	508
Municipal securities	14,209		7		(2		)	14,214
U.S. government agency bonds	75,172		—		(53		)	75,119
U.S. government treasury bonds	51,763		1		(81		)	51,683
Total Marketable Securities, Short-Term	$	359,956	$	14	$	(389	)	$	359,581

Long-term



December 31, 2015	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government agency bonds	$	43,853	$	—	$	(178	)	$	43,675
Corporate bonds	64,012		9		(218		)	63,803
U.S. government treasury bonds	37,673		—		(107		)	37,566
Municipal securities	3,993		—		(2		)	3,991
Asset-backed securities	2,338		—		(3		)	2,335
Total Marketable Securities, Long-Term	$	151,869	$	9	$	(508	)	$	151,370

Cash and cash equivalents are not included in the table above as the gross unrealized gains and losses are not material. We have no material short-term or long-term investments that have been in a continuous unrealized loss position for greater than twelve months as of September 30, 2016 and December 31, 2015. Amounts reclassified to earnings from accumulated other comprehensive income related to unrealized gains or losses were immaterial for the three and nine months ended September 30, 2016 and 2015. For the three and nine months ended September 30, 2016 and 2015, realized gains or losses were immaterial.

Our fixed-income securities investment portfolio consists of commercial paper, corporate bonds, municipal securities, U.S. government agency bonds, U.S. government treasury bonds, U.S. dollar denominated foreign corporate bonds, certificates of deposits, and asset-backed securities that have a maximum effective maturity of 27 months. The securities that we invest in are generally deemed to be low risk based on their credit ratings from the major rating agencies. The longer the duration of these securities, the more susceptible they are to changes in market interest rates and bond yields. As interest rates increase, those securities purchased at a lower yield show a mark-to-market unrealized loss. The unrealized losses are due primarily to changes in credit spreads and interest rates. We expect to realize the full value of these investments upon maturity or sale. The weighted average remaining duration of these securities was approximately 8 months and 9 months as of September 30, 2016 and December 31, 2015, respectively.

As the carrying value approximates the fair value for our short-term and long-term marketable securities shown in the tables above, the following table summarizes the fair value of our short-term and long-term marketable securities classified by maturity as of September 30, 2016 and December 31, 2015 (in thousands):



	September 30, 2016		December 31, 2015
Due in one year or less	$	193,018	$	359,581
Due in greater than one year	62,820		151,370
Total available for sale short-term and long-term marketable securities	$	255,838	$	510,951

Fair Value Measurements

We measure the fair value of our cash equivalents and marketable securities as 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. We use the GAAP fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value:

Level 1 — Quoted (unadjusted) prices in active markets for identical assets or liabilities.

Our Level 1 assets consist of money market funds and U.S. government treasury bonds. We did not hold any Level 1 liabilities as of September 30, 2016 and December 31, 2015.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, 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 asset or liability.

Our Level 2 assets consist of commercial paper, corporate bonds, certificates of deposits, U.S. government agency bonds, asset-backed securities, municipal securities, U.S. dollar denominated foreign corporate bonds and our Israeli funds that are mainly invested in insurance policies and foreign currency forward contracts. We obtain fair values for our Level 2 investments. Our custody bank and asset managers independently use professional pricing services to gather pricing data which may include quoted market prices for identical or comparable financial instruments, or inputs other than quoted prices that are observable either directly or indirectly, and we are ultimately responsible for these underlying estimates. The foreign currency forward contracts are valued using observable inputs such as quotations on forward foreign exchange rates. We did not hold any Level 2 liabilities as of September 30, 2016 or December 31, 2015.

Level 3 — Unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation.

Our Level 3 assets consist of long-term notes receivable and are included in other assets on our consolidated balance sheet. In the third quarter of 2016, we entered into long-term notes receivable and, as of September 30, 2016, the fair value approximated its carrying value of $2.0 million.

The following tables summarize our financial assets measured at fair value on a recurring basis as of September 30, 2016 and December 31, 2015 (in thousands):



Description	Balance as of September 30, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Observable Inputs (Level 3)
Cash equivalents:
Money market funds	$	92,931	$	92,931	$	—	$	—
Short-term investments:
Commercial paper	19,029		—		19,029		—
Corporate bonds	81,944		—		81,944		—
Municipal securities	9,201		—		9,201		—
U.S. government agency bonds	30,611		—		30,611		—
U.S. government treasury bonds	47,733		47,733		—		—
Certificates of deposits	4,500		—		4,500		—
Long-term investments:
U.S. government agency bonds	9,260		—		9,260		—
Corporate bonds	43,212		—		43,212		—
U.S. government treasury bonds	10,048		10,048		—		—
Asset-backed securities	300		—		300		—
Prepaid expenses and other current assets:
Israeli funds	2,527		—		2,527		—
Other assets:
Long-term notes receivable	2,000		—		—		2,000
	$	353,296	$	150,712	$	200,584	$	2,000



Description	Balance as of December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Cash equivalents:
Money market funds	$	70,148	$	70,148	$	—
Commercial paper	36,887		—		36,887
U.S. government agency bonds	3,599		—		3,599
Corporate bonds	625		—		625
Short-term investments:
Commercial paper	38,537		—		38,537
Corporate bonds	179,520		—		179,520
U.S. dollar denominated foreign corporate bonds	508		—		508
Municipal securities	14,214		—		14,214
U.S. government agency bonds	75,119		—		75,119
U.S. government treasury bonds	51,683		51,683		—
Long-term investments:
U.S. government agency bonds	43,675		—		43,675
Corporate bonds	63,803		—		63,803
U.S. government treasury bonds	37,566		37,566		—
Municipal securities	3,991		—		3,991
Asset-backed securities	2,335		—		2,335
Prepaid expenses and other current assets:
Israeli funds	2,436		—		2,436
	$	624,646	$	159,397	$	465,249

Derivative Financial Instruments

We have in the past and may in the future enter into foreign currency forward contracts to minimize the short-term impact of foreign currency exchange rate fluctuations on certain trade and intercompany receivables and payables, which are classified within level 2 of the fair value hierarchy. The net loss on these forward contracts was immaterial for the nine months ended September 30, 2016. The net gain or loss from the settlement of these foreign currency forward contracts is recorded in Interest and other income (expenses), net in the Consolidated Statement of Operations. We had no foreign exchange forward contracts outstanding as of September 30, 2016. Certain of our investment in private companies contain embedded derivatives, which do not require bifurcation as we have elected to measure these investments at fair value.