Fair Value Measurements

ASC topic 820, “Fair Value Measurements and Disclosures ” ("ASC No. 820") defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk, including the Company’s own credit risk.

ASC No. 820 establishes a three-level hierarchy of fair value measurements based on whether the inputs to those measurements are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. The fair-value hierarchy requires the use of observable market data when available and consists of the following levels:


•	Level 1—Quoted prices for identical instruments in active markets;


•	Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets; and


•	Level 3—Valuations derived from valuation techniques in which one or more significant inputs are unobservable.

The following table sets forth the Company’s assets and liabilities that were accounted for at fair value as of December 31, 2016 and 2015. The table excludes short-term investments, accounts receivable, accounts payable and accrued expenses for which fair values approximate their carrying amounts.

Assets and Liabilities Measured at Fair Value

The assets and liabilities measured at fair value on recurring basis are summarized below:



As of December 31, 2016	Level 1		Level 2		Level 3		Total
Assets
Money market and mutual funds*	$	118,185	$	—	$	—	$	118,185
Derivative financial instruments	—		6,319		—		6,319
Total	$	118,185	$	6,319	$	—	$	124,504
Liabilities
Derivative financial instruments	$	—	$	2,258	$	—	$	2,258
Total	$	—	$	2,258	$	—	$	2,258

As of December 31, 2015	Level 1		Level 2		Level 3		Total
Assets
Money market and mutual funds*	$	118,478	$	—	$	—	$	118,478
Derivative financial instruments	—		4,184		—		4,184
Total	$	118,478	$	4,184	$	—	$	122,662
Liabilities
Derivative financial instruments	$	—	$	2,358	$	—	$	2,358
Fair value of earn-out consideration	—		—		4,060		4,060
Total	$	—	$	2,358	$	4,060	$	6,418

* Included as a part of cash and cash equivalents.

Derivative Financial Instruments: The Company’s derivative financial instruments consist of foreign currency forward exchange contracts. Fair values for derivative financial instruments are based on independent sources including highly rated financial institutions and are classified as Level 2. See Note 12 for further details.

Fair value of earn-out consideration: The fair value measurement of earn-out consideration is determined using Level 3 inputs. The Company’s earn-out consideration represents a component of the total purchase consideration for its acquisition of RPM Direct LLC and RPM Data Solutions LLC (collectively, "RPM") in 2015. The measurement was calculated using unobservable inputs based on the Company’s own assessment of achievement of certain performance goals by RPM during the 2015 and 2016 calendar years. The Company estimated the fair value of the earn out consideration to be $4,060 utilizing a Monte Carlo simulation as at December 31, 2015. The Monte-Carlo simulation model simulates a range of possible performance levels and estimates the probabilities of the potential payouts. This model also incorporates a range of assumptions like discount rate, risk-free rate, assumed cost of debt, etc. The performance goals of RPM were not achieved during calendar year 2016 and accordingly the Company reduced the liability to nil as of December 31, 2016.