FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2016

The Company carries contingent liabilities and certain equity-based awards at fair value on a recurring basis on its consolidated balance sheets. Changes in the fair values of these financial liabilities are typically recorded within selling, general and administrative expenses on the Company’s consolidated statements of income and comprehensive income.

The following tables show the fair values of the Company’s financial liabilities measured at fair value on a recurring basis as of December 31, 2016 and 2015:



	As of December 31, 2016
	Balance		Level 1		Level 2		Level 3
Performance-based equity awards	$	3,789	$	3,789	$	—	$	—
Cash-settled restricted stock units	2,111		2,111		—		—
Total liabilities measured at fair value on a recurring basis	$	5,900	$	5,900	$	—	$	—



	As of December 31, 2015
	Balance		Level 1		Level 2		Level 3
Performance-based equity awards	$	5,364	$	—	$	—	$	5,364
Total liabilities measured at fair value on a recurring basis	$	5,364	$	—	$	—	$	5,364

Performance-based equity awards carried at fair value on a recurring basis represent contractual liabilities related to certain business combination transactions completed in 2014. During the determination period, the Company classified the performance-based equity awards within Level 3. The Company estimated the fair value of these liabilities based on transaction-specific inputs by discounting the expected cash flows to a present value, after taking into account estimated probabilities of reaching specified performance targets, as appropriate. During the year ended December 31, 2016, the fair value of the performance-based awards was measured using prices for which observable market information became available. As a result, the Company reclassified these liabilities from Level 3 to Level 1.

The fair value of the cash-settled restricted stock units is measured using prices for which observable market information is available.

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, 2016 and 2015, 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		)
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
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
Acquisition date fair value of contractual contingent liabilities — other acquisitions	800
Liability-classified stock-based awards	5,148
Changes in fair value of contractual contingent liabilities included in earnings	1,232
Changes in fair value of contractual contingent liabilities recorded against goodwill	200
Settlements of contractual contingent liabilities	(8,955		)
Reclassification of contractual contingent liabilities out of Level 3	(3,789		)
Contractual contingent liabilities at December 31, 2016	$	—

Estimates of fair value of financial instruments not carried at fair value on a recurring basis on the Company’s consolidated balance sheets are generally subjective in nature, and are determined as of a specific point in time based on the characteristics of the financial instruments and relevant market information. The Company uses the following methods to estimate the fair values of its financial instruments:


•	for financial instruments that have quoted market prices, those quoted prices are used to estimate fair value;


•	for financial instruments for which no quoted market prices are available, fair value is estimated using information obtained from independent third parties, or by discounting the expected cash flows using an estimated current market interest rate for the financial instrument.


•	for financial instruments for which no quoted market prices are available and that have no defined maturity, have a remaining maturity of 360 days or less, or reprice frequently to a market rate, the Company assumes that the fair value of these instruments approximates their reported value, after taking into consideration any applicable credit risk;

The generally short duration of certain of the Company’s assets and liabilities results in a significant number of assets and liabilities for which fair value equals or closely approximates the amount recorded on the Company’s consolidated balance sheets. These assets and liabilities are reported on the Company’s consolidated balance sheets:


•	cash and cash equivalents;


•	time deposits and restricted cash;


•	employee loans and notes receivable;


•	borrowings under the 2014 Credit Facility (Note 13)

In addition, due to the relatively short duration of certain of our loans, the Company considers fair value for these loans to approximate their carrying amounts. The fair value of other types of loans, such as employee loans issued under the Housing Program, is estimated using information on the rates 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”), after taking into consideration any applicable credit and liquidity risk.

The following tables present the reported amounts and estimated fair values of the financial assets and liabilities not carried at fair value on a recurring basis, as they would be categorized within the fair-value hierarchy, as of the dates indicated:



					Fair Value Hierarchy
	Balance		Estimated Fair Value		Level 1		Level 2		Level 3
December 31, 2016
Financial Assets:
Cash and cash equivalents	$	362,025	$	362,025	$	362,025	$	—	$	—
Time deposits and restricted cash	$	3,042	$	3,042	$	—	$	3,042	$	—
Employee loans	$	5,978	$	5,978	$	—	$	—	$	5,978
Financial Liabilities:
Borrowing under 2014 Credit Facility	$	25,019	$	25,019	$	—	$	25,019	$	—



					Fair Value Hierarchy
	Balance		Estimated Fair Value		Level 1		Level 2		Level 3
December 31, 2015
Financial Assets:
Cash and cash equivalents	$	199,449	$	199,449	$	199,449	$	—	$	—
Time deposits and restricted cash	$	30,419	$	30,419	$	—	$	30,419	$	—
Employee loans	$	6,338	$	6,338	$	—	$	—	$	6,338
Financial Liabilities:
Borrowing under 2014 Credit Facility	$	35,000	$	35,000	$	—	$	35,000	$	—

- 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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