Fair Value Measurement

9 Months Ended

Sep. 30, 2013

4. Fair Value Measurement

Accounting guidance on fair value measurements for certain financial assets and liabilities requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1 — Quoted market prices in active markets for identical assets or liabilities.

Level 2 — Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3 — Unobservable inputs reflecting the reporting entity’s own assumptions or external inputs from inactive markets.

A financial asset’s or liability’s classification within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement.

The following table presents information, as of September 30, 2013 and December 31, 2012, about the Company’s financial liabilities. Contingent purchase price related to acquisitions is measured at fair value on a recurring basis, according to the valuation techniques the Company used to determine fair value (in thousands):



	September 30, 2013
	Level 1		Level 2		Level 3		Fair Value
Contingent purchase price related to acquisitions	$	—	$	—	$	22,429	$	22,429
Total liabilities at fair value	$	—	$	—	$	22,429	$	22,429



	December 31, 2012
	Level 1		Level 2		Level 3		Fair Value
Contingent purchase price related to acquisitions	$	—	$	—	$	20,907	$	20,907
Total liabilities at fair value	$	—	$	—	$	20,907	$	20,907

In measuring the fair value of the contingent purchase price liability, the Company used an income approach that considers the expected future earnings of the acquired businesses and the resulting contingent payments, discounted at a risk-adjusted rate.

The table below sets forth a reconciliation of the Company’s beginning and ending Level 3 financial liability balance for the three and nine months ended September 30, 2013 and 2012 and the twelve months ended December 31, 2012 (in thousands):



	Three Months Ended September 30,					Nine Months Ended September 30,						Twelve Months Ended December 31,
	2013			2012		2013			2012			2012
Balance as of Balance, beginning of period	$	23,698		$	7,210	$	20,907		$	3,015		$	3,015
Earnouts and adjustments related to acquisitions	1,900			7,371		7,678			11,733			17,733
Payments of contingent purchase obligations	—			—		(2,407		)	(284		)	(284		)
Adjustments to contingent purchase obligation	(3,169		)	153		(3,749		)	270			443
Balance, end of period	$	22,429		$	14,734	$	22,429		$	14,734		$	20,907

- 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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