FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2015

As required by the guidance for fair value measurements, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Thus, assets and liabilities categorized as Level 3 may be measured at fair value using inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Significant unobservable inputs used in the fair value measurement of contingent consideration related to business acquisitions are forecasts of expected future operating results of those businesses as developed by the Company’s management and the probability of achievement of those operating forecasts. Management’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy levels. During the years ended December 31, 2015 and 2014, there were no transfers among Level 1, Level 2, or Level 3 classified financial assets and liabilities. Changes in the values of these financial liabilities, if any, are typically recorded within selling, general and administrative expenses line on the Company’s consolidated statements of income and comprehensive income.

The following table tables show the fair values of the Company’s financial assets and liabilities measured at fair value as of December 31, 2015 and 2014:



	As of December 2015
	Balance		Level 1		Level 2		Level 3
Cash and cash equivalents	199,449		199,449		—		—
Time deposits and restricted cash	30,419		—		30,419		—
Employee loans	6,338		—		—		6,338
Total assets measured at fair value	$	236,206	$	199,449	$	30,419	$	6,338

Contingent consideration	—		—		—		—
Performance-based equity awards	5,364		—		—		5,364
Total liabilities measured at fair value	$	5,364	$	—	$	—	$	5,364



	As of December 2014
	Balance		Level 1		Level 2		Level 3
Cash and cash equivalents	220,534		220,534		—		—
Time deposits and restricted cash	156		—		156		—
Employee loans	6,515		—		—		6,515
Total assets measured at fair value	$	227,205	$	220,534	$	156	$	6,515

Contingent consideration	37,400		—		—		37,400
Performance-based equity awards	3,223		—		—		3,223
Total liabilities measured at fair value	$	40,623	$	—	$	—	$	40,623

The Company classifies its contingent considerations within Level 3 as those inputs are specific to a given consideration and are not observable in the market. The housing loans are measured at the time of issuance using the Level 3 inputs within the fair value hierarchy because they are valued using significant unobservable inputs. Company issued short-term, non-interest bearing relocation and other loans to employees have a short term and high certainty of repayment, therefore, their carrying amount is a reasonable estimate of their fair value.

The Company analyzes the rate of return that market participants in Belarus would require when investing in unsecured U.S. dollar-denominated government bonds with similar maturities (a “risk-free rate”) and evaluated a risk premium component to compensate the market participants for the credit and liquidity risks inherent in the loans’ cash flows. As of December 31, 2015 and December 31, 2014, the carrying values of outstanding employee loans and loans issued during those years approximated their fair values.

As of December 31, 2014, contingent consideration and performance-based equity awards included amounts payable in cash and stock in connection with the acquisitions of businesses completed in the year ended December 31, 2014 (Note 2). As of December 31, 2015, the only financial liabilities related to acquisitions of businesses included performance-based equity awards.

The fair value of the contingent consideration, which is based on the present value of the expected future payments to be made to the sellers of the acquired businesses, was derived by analyzing the future performance of the acquired businesses using the earnout formula and performance targets specified in each purchase agreement and adjusting those amounts to reflect the ability of the acquired entities to achieve the stated targets. The measurement period related to the contingent consideration for each 2014 acquisition was complete as of June 30, 2015, therefore, the amount of total consideration to be paid is no longer subject to change as of December 31, 2015.

A reconciliation of the beginning and ending balances of acquisition-related contractual contingent liabilities using significant unobservable inputs (Level 3) for the years ended December 31, 2015 and 2014, was as follows:



	Amount
Contractual contingent liabilities at January 1, 2014	$	—
Acquisition date fair value of contractual contingent liabilities — Netsoft	1,825
Acquisition date fair value of contractual contingent liabilities — Jointech	20,000
Acquisition date fair value of contractual contingent liabilities — GGA	11,400
Acquisition date fair value of contractual contingent liabilities — Great Fridays	1,173
Liability-classified stock-based awards	3,088
Changes in fair value of contractual contingent liabilities included in earnings	2,059
Changes in fair value of contractual contingent liabilities recorded against goodwill	1,366
Effect of net foreign currency exchange rate changes	(288		)
Settlements of contractual contingent liabilities	—
Contractual contingent liabilities at December 31, 2014	$	40,623
Liability-classified stock-based awards	5,148
Changes in fair value of contractual contingent liabilities included in earnings	4,355
Changes in fair value of contractual contingent liabilities recorded against goodwill	—
Effect of net foreign currency exchange rate changes	246
Settlements of contractual contingent liabilities	(45,008		)
Contractual contingent liabilities at December 31, 2015	$	5,364

- 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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