Fair Value Measurements

9 Months Ended

May 31, 2022

(4)

Fair Value Measurements

Available-for-sale investments within cash equivalents and short-term investments consist of the following (in thousands):


	May 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Money market funds - presented in cash and cash equivalents	$	44,575	$	—	$	—	$	44,575
U.S. Government agency securities - presented in cash and cash equivalents		31,992		—		—		31,992
U.S. Government agency securities - presented in short-term investments		223,342		169		—		223,511
Total	$	299,909	$	169	$	—	$	300,078


	August 31, 2021
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
U.S. Government agency securities - presented in short-term investments	$	191,917	$	64	$	—	$	191,981
Total	$	191,917	$	64	$	—	$	191,981

The Company has recorded the securities at fair value in its consolidated balance sheet and unrealized gains and losses are reported as a component of accumulated other comprehensive income (loss). The amount of realized gains and losses reclassified into earnings are based on the specific identification of the securities sold or securities that reached maturity date. There were no sales, twelve purchases, and ten maturities of securities during the nine months ended May 31, 2022.

Fair Value

The Company measures certain financial assets and liabilities at fair value. Fair value is determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the principal market or the most advantageous market.

Inputs used in the valuation techniques to derive fair values are classified based on a three-level hierarchy, as follows:

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Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

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Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

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Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

The following tables present the Company’s financial assets and liabilities measured and recorded at fair value on a recurring basis using the above input categories as of May 31, 2022 and August 31, 2021:


	May 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds - presented in cash and cash equivalents	$	44,575	$	—	$	—	$	44,575
U.S. Government agency securities - presented in cash and cash equivalents	$	31,992					$	31,992
U.S. Government agency securities - presented in short-term investments		223,511		—		—		223,511
Total assets	$	300,078	$	—	$	—	$	300,078
Liabilities:
Liability classified awards	$	58	$	—	$	173	$	231
Total liabilities	$	58	$	—	$	173	$	231


	August 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
U.S. Government agency securities - presented in short-term investments	$	—	$	191,981	$	—	$	191,981
Total assets	$	—	$	191,981	$	—	$	191,981
Liabilities:
Liability classified awards	$	1,448	$	—	$	1,588	$	3,036
Contingent earnout liability		—		—		5,462		5,462
Total liabilities	$	1,448	$	—	$	7,050	$	8,498

The contingent earnout liability related to business combinations is recorded at fair value on the acquisition date and is adjusted each reporting period for changes in fair value, which can result from changes in anticipated payments and changes in assumed discount periods and rates. These inputs are unobservable in the market and therefore categorized as level 3 inputs as defined above. Quoted prices for liability classified stock appreciation rights are not readily available. Accordingly, the Company uses a Black-Scholes model to estimate the fair value of these awards, which utilizes level three inputs. The following table summarizes the changes in the estimated fair value of the Company’s level 3 categorized liability classified awards for the nine months ended May 31, 2022:


Balance as of August 31, 2021	$	1,588
Additions due to new awards		—
Net change in the fair value		(1,415	)
Cash settlement of awards		—
Balance as of May 31, 2022	$	173

- 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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