Fair Value Measurements

9 Months Ended

Sep. 30, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

NOTE 4. FAIR VALUE MEASUREMENTS

We adopted ASC 820, Fair Value Measurements, or ASC 820, as it relates to financial assets and financial liabilities. ASC 820 defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements.

ASC 820 defines fair value 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. This standard is now the single source in GAAP for the definition of fair value, except for the fair value of leased property as defined in ASC 840 Accounting for Leases, which establishes a fair value hierarchy that 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 under ASC 820 are described below:

• Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

• 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, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as consider counterparty credit risk in our assessment of fair value.

The following is a summary of our cash, cash equivalents and restricted investment as of September 30, 2012 and December 31, 2011, respectively (in thousands):

			As of September 30, 2012
	Amortized Cost		Unrealized  Gain (Loss)		Estimated  Fair Value
Cash	$	2,967	$	—	$	2,967
Certificates of deposit		310		—		310
Money market funds		111,251		—		111,251
	$	114,528	$	—	$	114,528
Reported as:
Cash and cash equivalents					$	114,218
Restricted investment						310
					$	114,528

	Amortized Cost		As of December 31, 2011
			Unrealized  Gain (Loss)		Estimated  Fair Value
Cash	$	3,569	$	—	$	3,569
Certificates of deposit		310		—		310
Money market funds		95,247		—		95,247
	$	99,126	$	—	$	99,126
Reported as:
Cash and cash equivalents					$	98,816
Restricted investment						310
					$	99,126

Our investment instruments are classified within Level 1 or Level 2 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 that are generally classified within Level 1 of the fair value hierarchy include money market securities. The types of investments that are generally classified within Level 2 of the fair value hierarchy include U.S. government and agency securities, corporate debt securities and certificates of deposit.

As of September 30, 2012 and December 31, 2011, 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, respectively (in thousands):

As of September 30, 2012	Level 1		Level 2		Level 3		Total
Certificates of deposit	$	—	$	310	$	—	$	310
Money market funds		111,251		—		—		111,251
Total	$	111,251	$	310	$	—	$	111,561

As of December 31, 2011	Level 1		Level 2		Level 3		Total
Certificates of deposit	$	—	$	310	$	—	$	310
Money market funds		95,247		—		—		95,247
Total	$	95,247	$	310	$	—	$	95,557

Our investments in money market funds are measured at fair value on a recurring basis. Our money market funds comply with Rule 2a-7 of the Investment Company Act of 1940 and are required to be priced and have a fair value of $1.00 net asset value per share. These money market funds are actively traded and reported daily through a variety of sources. Due to the structure and valuation required by the Investment Company Act of 1940 regarding Rule 2a-7 funds, the fair value of the money market fund investments is classified as Level 1.

The fair value of the certificates of deposit is classified as Level 2 due to the nature of a contractual restriction in our lease agreement which limits our ability to liquidate the investment.