Fair Value Measurements and Long-term Investments

6 Months Ended

Jun. 30, 2022

Fair Value Measurements and Long-term Investments

6. Fair Value Measurements and Long-term Investments

Fair value measurements are based upon observable and unobservable inputs.

Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2: Quoted prices for similar instruments in active markets with inputs that are observable, either directly or indirectly. Our Level 2 derivative financial instruments include foreign currency forward contracts valued based upon observable values of spot and forward foreign currency exchange rates.

Level 3: Unobservable inputs are significant to the fair value of the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. Our Level 3 instrument reflects the fair value of contingent consideration related to a completed acquisition. The fair value is based on a discounted cash flow analysis reflecting the likelihood of achieving specified performance measures or events and captures the contractual nature of the contingencies, commercial risk or time value of money.

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of the respective balance sheet dates:


	Balance Sheet	June 30, 2022								December 31, 2021
(In thousands)	Classifications	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Foreign exchange derivative assets	Prepaid expenses and other current assets	$	0	$	0	$	0	$	0	$	0	$	352	$	0	$	352
Total assets		$	0	$	0	$	0	$	0	$	0	$	352	$	0	$	352

Foreign exchange derivative assets	Accrued expenses	$	0	$	54	$	0	$	54	$	0	$	0	$	0	$	0
Contingent consideration - current	Accrued expenses		0		0		0		0		0		0		19		19
Total liabilities		$	0	$	54	$	0	$	54	$	0	$	0	$	19	$	19

The changes in our Level 3 liability measured at fair value on a recurring basis at June 30, 2022 is summarized as follows:


(In thousands)	Contingent Consideration
Balance at December 31, 2021	$	19
Payments		(19	)
Balance at June 30, 2022	$	0

Long-term Investments

The following table summarizes our long-term equity investments which are included in Other assets in the accompanying consolidated balance sheets:


	Number of Investees		Original		Carrying Value at
(In thousands, except for number of investees)	at June 30, 2022		Cost		June 30, 2022		December 31, 2021
Equity method investments (1)		4	$	7,099	$	11,579	$	12,260
Cost with adjustments		7		47,114		49,109		49,293
Total long-term equity investments		11	$	54,213	$	60,688	$	61,553

(1) Allscripts share of the earnings of our equity method investees is reported based on a one quarter lag.

During the three and six months ended June 30, 2021, one of our third-party cost method investments converted its notes and we received 475 thousand shares in such third party as a result of the conversion. We also revalued our existing investment based on the note conversion share price. The note conversion and the revaluation of the existing investment resulted in a $9.7 million gain, which is included in the Other income, net line in our consolidated statements of operations for the three and six months ended June 30, 2021.

As of June 30, 2022, it is not practicable to estimate the fair value of our non-marketable cost and equity method investments, primarily because of their illiquidity and restricted marketability. The factors we considered in trying to determine fair value include, but are not limited to, available financial information, the issuer’s ability to meet its current obligations, the issuer’s subsequent or planned raises of capital and observable price changes in orderly transactions.

Impairment of Long-term Investments

Each quarter, management performs an assessment of each of our investments on an individual basis to determine if there have been any declines in fair value. Based on our assessment, we determined no impairment charges were necessary for the six months ended June 30, 2022.

Long-term Financial Liabilities

Our long-term financial liabilities include amounts outstanding under our Senior Secured Credit Facility (as described in Note 10, “Debt”), with carrying values that approximate fair value since the interest rates approximate current market rates. Refer to Note 10, “Debt,” for further information regarding our long-term financial liabilities.

- 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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