Fair Value Measurement

6 Months Ended

Dec. 31, 2020

Fair Value Measurement

Fair Value Measurement

(7)  Fair Value Measurement

Fair value is defined 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. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

● Level 1—Quoted prices in active markets for identical assets and liabilities.

● Level 2—Quoted prices in active markets for similar assets and liabilities, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

● Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The Company measures certain cash and cash equivalents, accounts receivable, accounts payable and client fund obligations at fair value on a recurring basis using Level 1 inputs. The Company considers the recorded value of these financial assets and liabilities to approximate the fair value of the respective assets and liabilities at June 30, 2020 and December 31, 2020 based upon the short-term nature of these assets and liabilities.

Marketable securities, consisting of securities classified as available-for-sale as well as certain cash equivalents, are recorded at fair value on a recurring basis using Level 2 inputs obtained from an independent pricing service. Available-for-sale securities include commercial paper, corporate bonds, asset-backed securities and U.S. treasury securities. The independent pricing service utilizes a variety of inputs including benchmark yields, broker/dealer quoted prices, reported trades, issuer spreads as well as other available market data. The Company, on a sample basis, validates the pricing from the independent pricing service against another third-party pricing source for reasonableness. The Company has not adjusted any prices obtained by the independent pricing service, as it believes they are appropriately valued. There were no available-for-sale securities classified in Level 3 of the fair value hierarchy at June 30, 2020 or December 31, 2020.

The fair value level for the Company’s cash and cash equivalents and available-for-sale securities is as follows:

	June 30, 2020
	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	250,851	$	250,851	$	—	$	—
Funds held for clients' cash and cash equivalents		1,241,282		1,241,282		—		—
Available-for-sale securities:
Commercial paper		6,649		—		6,649		—
Corporate bonds		44,757		—		44,757		—
Asset-backed securities		50,402		—		50,402		—
U.S. treasury securities		21,369		—		21,369		—
Total available-for-sale securities		123,177		—		123,177		—
Total investments	$	1,615,310	$	1,492,133	$	123,177	$	—

	December 31, 2020
	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	218,696	$	218,696	$	—	$	—
Funds held for clients' cash and cash equivalents		2,154,552		2,154,552		—		—
Available-for-sale securities:
Corporate bonds		33,345		—		33,345		—
Asset-backed securities		30,026		—		30,026		—
Total available-for-sale securities		63,371		—		63,371		—
Total investments	$	2,436,619	$	2,373,248	$	63,371	$	—

The Company determined that the carrying value of long-term debt under its revolving credit facility approximates fair value, which is classified as Level 2, because interest rates associated with the borrowings reflect market rates.