Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2017

4. Fair Value of Financial Instruments

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 inputs are unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Financial instruments measured at fair value as of September 30, 2017 are classified below based on the fair value hierarchy described above:


			Active		Observable		Unobservable
	September 30,		Markets		Inputs		Inputs
Description	2017		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Cash equivalents:
Money market funds	$	57,329	$	57,329	$	—	$	—
Investments, available-for-sale:
U.S Treasury obligations		323,345		323,345		—		—
Government agency securities		9,978		9,978
Total	$	390,652	$	390,652	$	—	$	—

Financial instruments measured at fair value as of December 31, 2016 are classified below based on the fair value hierarchy described above:


			Active		Observable		Unobservable
	December 31,		Markets		Inputs		Inputs
Description	2016		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Cash equivalents:
Money market funds	$	52,069	$	52,069	$	—	$	—
Investments, available-for-sale:
U.S Treasury obligations		216,149		216,149		—		—
Total	$	268,218	$	268,218	$	—	$	—

The fair value of the Company’s term loan payable is determined using current applicable rates for similar instruments as of the balance sheet date. The carrying value of the Company’s term loan payable approximates fair value because the Company’s interest rate yield approximates current market rates. The Company’s term loan payable is a Level 3 liability within the fair value hierarchy.

- 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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