3. FAIR VALUE

The tables below set forth our financial assets and liabilities measured at fair value on a recurring basis using a market-based approach. Our financial assets and liabilities, all of which represent interest rate exchange agreements (which we refer to as “interest rate swaps”) have been categorized according to the three-level fair value hierarchy established by Accounting Standards Codification (“ASC”) No. 820 — Fair Value Measurement, which prioritizes the inputs used in measuring fair value, as follows (dollars in thousands):

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Level 1 — Quoted market prices in active markets for identical assets or liabilities.

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Level 2 — Observable market based inputs or unobservable inputs that are corroborated by market data.

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Level 3 — Unobservable inputs that are not corroborated by market data.


	Fair Value as of September 30, 2016
	Level 1		Level 2		Level 3		Total
Assets
Interest rate exchange agreements	$	—	$	—	$	—	$	—
Liabilities
Interest rate exchange agreements	$	—	$	6,190	$	—	$	6,190

	Fair Value as of December 31, 2015
	Level 1		Level 2		Level 3		Total
Assets
Interest rate exchange agreements	$	—	$	1,818	$	—	$	1,818
Liabilities
Interest rate exchange agreements	$	—	$	3,695	$	—	$	3,695

The fair value of our interest rate swaps represents the estimated amount that we would receive or pay to terminate such agreements, taking into account projected interest rates, based on quoted London Interbank Offered Rate (“LIBOR”) futures and the remaining time to maturity. While our interest rate swaps are subject to contractual terms that provide for the net settlement of transactions with counterparties, we do not offset assets and liabilities under these agreements for financial statement presentation purposes, and assets and liabilities are reported on a gross basis.

As of September 30, 2016, we recorded a current liability in accounts payable, accrued expenses and other current liabilities of $3.2 million, a long-term liability in other non-current liabilities of $3.0 million and no current or long-term assets. As of December 31, 2015, we recorded a long-term asset of $1.8 million, a current liability in accounts payable, accrued expenses and other current liabilities of $3.7 million, and no current assets or long-term liabilities.

As a result of the changes in the mark-to-market valuations on our interest rate swaps, we recorded a net gain on derivatives of $4.4 million and a net loss of $4.9 million for the three months ended September 30, 2016 and 2015, respectively, and a net loss on derivatives of $4.3 million and a net gain on derivatives of $1.2 million for the nine months ended September 30, 2016 and 2015, respectively.