Fair Value Measurements

6 Months Ended

Jun. 30, 2022

3. Fair Value Measurements

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

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Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

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Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

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Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

Fair value accounting is applied for all financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). As of June 30, 2022, and December 31, 2021, the carrying amount of prepaid expenses and other current assets, accounts payable and accrued liabilities approximated their estimated fair value due to the short-term nature of these items. The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:


	June 30, 2022
	Level 1		Level 2		Level 3		Fair Value
	(in thousands)
Assets:
Money market funds	$	20,281	$	—	$	—	$	20,281
Commercial paper		—		138,816		—		138,816
U.S. treasury securities		—		28,422		—		28,422
Total financial assets	$	20,281	$	167,238	$	—	$	187,519


	December 31, 2021
	Level 1		Level 2		Level 3		Fair Value
	(in thousands)
Assets:
Money market funds	$	7,794	$	—	$	—	$	7,794
Corporate bonds		—		4,499		—		4,499
Commercial paper		—		187,749		—		187,749
U.S. treasury securities		—		16,024		—		16,024
Total financial assets	$	7,794	$	208,272	$	—	$	216,066

Money market funds are highly liquid investments and are actively traded. The pricing information on the Company’s money market funds is readily available and can be independently validated as of the measurement date. This approach results in the classification of these securities as Level 1 of the fair value hierarchy.

The Company’s short-term investments are classified as cash equivalents if their original maturities are less than three months. The Company’s short-term investments are considered Level 2 financial instruments as their fair values are determined using inputs that are observable in the market or can be derived principally from recently executed transactions, cash flow models with yield curves, and benchmark securities.

There were no transfers in or out of Level 3 of the fair value hierarchy during the periods presented.

- 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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