Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2018

3. Fair Value of Financial Instruments

The Company evaluates assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level to classify them for each reporting period. There have been no transfers between fair value measurement levels during the three months ended March 31, 2018.

The Company’s cash equivalents and short-term investment instruments are classified within Level I or Level II of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted market prices in active markets include mutual funds and money market securities, and are generally classified within Level I of the fair value hierarchy. The types of instruments valued based on quoted prices in less active markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability include U.S. agency securities, investment-grade corporate bonds, bank deposits, and commercial paper. Such instruments are generally classified within Level II of the fair value hierarchy.

The Company executes its foreign currency contracts primarily in the retail market in an over-the-counter environment with a relatively high level of price transparency. The market participants usually are large multi-national and regional banks. The Company’s foreign currency contracts valuation inputs are based on quoted prices and quoted pricing intervals from public data sources and do not involve management judgment. These contracts are typically classified within Level II of the fair value hierarchy.

The following table sets forth the Company’s assets and liabilities that were measured at fair value as of March 31, 2018 and December 31, 2017, by level within the fair value hierarchy (in thousands):

	As of March 31, 2018
	Level I		Level II		Level III		Fair Value
Financial Assets:
Cash equivalents:
Money market funds	$	84,081		-		-	$	84,081
Commercial paper		-		3,993		-		3,993
US government and US government agencies		-		15,454		-		15,454
Short-term investments:
Commercial paper		-		-		-		-
Corporate debt obligations		-		117,829		-		117,829
US government and US government agencies		-		46,227		-		46,227
Bank deposits		-		479		-		479
Prepaid expenses and other current assets - Forward foreign exchange contracts		-		175		-		175
Total financial assets	$	84,081	$	184,157		-	$	268,238

	As of December 31, 2017
	Level I		Level II		Level III		Fair Value
Financial Assets:
Cash equivalents:
Money market funds	$	84,144	$	-	$	-	$	84,144
US government and US government agencies				16,364				16,364
Short-term investments:
Commercial paper		-		699		-		699
Corporate debt obligations		-		122,832		-		122,832
US government and US government agencies		-		42,983		-		42,983
Bank deposits		-		479		-		479
Prepaid expenses and other current assets - Forward foreign exchange contracts		-		551		-		551
Total financial assets	$	84,144	$	183,908	$	-	$	268,052

In addition to the amounts disclosed in the above table, the fair value of the Company’s Israeli severance pay assets, totaling $6.4 million and $6.6 million as of March 31, 2018 and December 31, 2017, respectively comprised of Level II assets.

- 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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