Note 3 - Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2016

Notes to Financial Statements

Fair Value Disclosures [Text Block]

Note 3.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources

(observable inputs)

and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (

unobservable inputs

). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities

(Level 1)

and the lowest priority to unobservable inputs

(Level 3).

The three levels of the fair value hierarchy are described below:

● Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.

● Level 2: Directly or indirectly observable inputs as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active. Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data from actively quoted markets for substantially the full term of the financial instrument.

● Level 3: Unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

As of June 30, 2016, financial assets measured and recognized at fair value on a recurring basis and classified under the appropriate level of the fair value hierarchy as described above were as follows (in thousands):

June 30, 2016	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	1,343	$	—	$	—	$	1,343
Commercial paper		—		549		—		549
Marketable investments:
Available-for-sale securities		—		35,902		—		35,902
Total assets at fair value	$	1,343	$	36,451	$	—	$	37,794

As of December 31, 2015, financial assets measured and recognized at fair value on a recurring basis and classified under the appropriate level of the fair value hierarchy as described above was as follows (in thousands):

December 31, 2015	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	1,000	$	—	$	—	$	1,000
Commercial paper		—		38		—		38
Marketable investments:
Available-for-sale securities		—		37,539		—		37,539
Total assets at fair value	$	1,000	$	37,577	$	—	$	38,577

The Company’s Level 2 investments include U.S. government-backed securities and corporate securities that are valued based upon observable inputs that may include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including market research publications. The average remaining maturity of the Company’s Level 2 investments as of June 30, 2016 is less than 36 months and all of these investments are rated by S&P and Moody’s at A or better

.