NOTE 6—FINANCIAL INSTRUMENTS

Fair value measurements

Authoritative accounting guidance for fair value measurements provides a framework for measuring fair value and related disclosure. The guidance applies to all financial assets and financial liabilities that are measured on a recurring basis. The guidance requires fair value measurement to be classified and disclosed in one of the following three categories:

Level 1: Valuations based on quoted prices in active markets for identical assets and liabilities. The fair value of available-for-sale securities included in the Level 1 category is based on quoted prices that are readily and regularly available in an active market. As of March 31, 2016, the Level 1 category included money market funds of $6.6 million, which were included in cash and cash equivalents on the Consolidated Balance Sheets.

Level 2: Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly. The fair value of available-for-sale securities included in the Level 2 category is based on the market values obtained from an independent pricing service that were evaluated using pricing models that vary by asset class and may incorporate available trade, bid and other market information and price quotes from well established independent pricing vendors and broker-dealers. As of March 31, 2016, the Level 2 category included short-term investments of $23.2 million and long term-investments of $11.1 million, which were primarily comprised of certificates of deposit, corporate debt securities and government and agency securities.

Level 3: Valuations based on inputs that are unobservable and involve management judgment and the reporting entity's own assumptions about market participants and pricing. As of March 31, 2016, the Company’s Level 3 financial instruments measured at fair value on the Consolidated Balance Sheets consisted of the contingent consideration liability related to the MikaMonu acquisition. Refer to Note 11, “Acquisition” for more information.

The fair value of financial assets measured on a recurring basis is as follows (in thousands):


			Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets and Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
	March 31, 2016		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds	$	6,611	$	6,611		—	$	—
Marketable securities		34,297		—		34,297		—
Total	$	40,908	$	6,611	$	34,297	$	—


			Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets and Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
	March 31, 2015		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds	$	4,409	$	4,409	$	—	$	—
Marketable securities		43,941		—		43,941		—
Total	$	48,350	$	4,409	$	43,941	$	—

Short-term and long-term investments

All of the Company's short-term and long-term investments are classified as available-for-sale. Available-for-sale debt securities with maturities greater than twelve months are classified as long-term investments when they are not intended for use in current operations. Investments in available-for-sale securities are reported at fair value with unrecognized gains (losses), net of tax, as a component of accumulated other comprehensive income on the Consolidated Balance Sheets. The Company had money market funds of $6.6 million and $4.4 million at March 31, 2016 and March 31, 2015, respectively, included in cash and cash equivalents on the Consolidated Balance Sheets. The Company monitors its investments for impairment periodically and records appropriate reductions in carrying values when the declines are determined to be other-than-temporary.

The following table summarizes the Company's available-for-sale investments:



	March 31, 2016
			Gross		Gross
			Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In thousands)
Short-term investments:
State and municipal obligations	$	1,011	$	-	$	-	$	1,011
Corporate notes		5,680		-		(3)		5,677
Agency bonds		2,001		1		-		2,002
Foreign government obligations		2,695		3		-		2,698
Certificates of deposit		11,750		12		-		11,762
Total short-term investments	$	23,137	$	16	$	(3)	$	23,150
Long-term investments:
Corporate notes	$	558	$	1	$	-	$	559
Certificates of deposit		8,500		24		(1)		8,523
Agency bonds		1,000		4		-		1,004
Foreign government obligations		1,060		1		-		1,061
Total long-term investments	$	11,118	$	30	$	(1)	$	11,147



	March 31, 2015
			Gross		Gross
			Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In thousands)
Short-term investments:
State and municipal obligations	$	6,810	$	-	$	-	$	6,810
Corporate notes		7,366		10		-		7,376
Agency bonds		1,006		-		-		1,006
Certificates of deposit		7,000		9		-		7,009
Total short-term investments	$	22,182	$	19	$	-	$	22,201
Long-term investments:
State and municipal obligations	$	1,053	$	4	$	-	$	1,057
Corporate notes		4,232		-		(10)		4,222
Certificates of deposit		9,750		24		(1)		9,773
Agency bonds		4,003		4		(2)		4,005
Other		2,684		-		(1)		2,683
Total long-term investments	$	21,722	$	32	$	(14)	$	21,740

The Company's investment portfolio consists of both corporate and governmental securities that have a maximum maturity of three years. All unrealized losses are due to changes in interest rates and bond yields. Subject to normal credit risks, the Company has the ability to realize the full value of all these investments upon maturity.

At March 31, 2016, the deferred tax liability related to unrecognized gains and losses on short-term and long-term investments was $14,000. At March 31, 2015, the deferred tax liability related to unrecognized gains and losses on short-term and long-term investments was $11,000.

As of March 31, 2016, contractual maturities of the Company's available-for-sale non-equity investments were as follows:



			Fair
	Cost		Value
	(In thousands)
Maturing within one year	$	23,137	$	23,150
Maturing in one to three years		11,118		11,147
Maturing in more than three years		-		-
	$	34,255	$	34,297