Fair Value of Financial Instruments

9 Months Ended

Dec. 31, 2019

Fair Value Disclosures [Abstract]

FAIR VALUE OF FINANCIAL INSTRUMENTS

4. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Group's financial instruments consist primarily of cash and cash equivalents, short term investments in time deposits, restricted cash, accounts receivable, unbilled accounts receivable, accounts payable, accrued liabilities and derivative financial instruments. The carrying amounts of cash and cash equivalents, short term investments in time deposits, restricted cash, accounts receivable, unbilled accounts receivable, accounts payable and accrued liabilities as of the reporting date approximate their fair market value due to the relatively short period of time of original maturity tenure of these instruments.

Basis of Fair Value Measurement

Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The current accounting guidance for fair value measurements defines a three-level valuation hierarchy for disclosures as follows:

Level 1:	Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2:	Inputs other than quoted prices included within Level 1 that are observable, unadjusted quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3:	Unobservable inputs that are supported by little or no market activity, which require the Group to develop its own assumptions.

The following table sets forth the financial assets, measured at fair value, by level within the fair value hierarchy as of December 31, 2019 and March 31, 2019:

Assets and Liabilities	As of
	December 31, 2019			March 31, 2019
Level 2
Derivative financial instruments (included in the following line items in the consolidated balance sheets)
Prepaid expenses and other current assets	$	470		$	132
Other liabilities		(101	)		(21	)
Other assets		155			436
Accrued expenses and other liabilities		(72	)		(136	)
	$	452		$	411
Level 3
Contingent consideration		(3,007	)		(4,884	)
	$	(3,007	)	$	(4,884	)
Total	$	(2,555	)	$	(4,473	)

The following table presents the change in level 3 instruments:

	As of and for the  three months ended
	December 31, 2019			December 31, 2018
Opening balance	$	(4,206	)	$	—
Partial payment of contingent consideration		—			—
Total gain recognized in the consolidated statements of income		1,199			—
Closing balance	$	(3,007	)	$	—

	As of and for the  nine months ended
	December 31, 2019			December 31, 2018
Opening balance	$	(4,884	)	$	(835	)
Partial payment of contingent consideration		678			—
Total gain recognized in the consolidated statements of income		1,199			835
Closing balance	$	(3,007	)	$	—

The Company considers all short-term investments purchased with an original maturity date of three months or less to be cash equivalents.

Contingent consideration pertaining to the acquisition of the consulting business of Agile as of December 31, 2015 has been classified under level 3 as the fair valuation of such contingent consideration and has been calculated using one or more significant inputs which are not based on observable market data. The fair value of the contingent consideration was estimated using a discounted cash flow technique with significant inputs that are not observable in the market. The significant inputs not supported by market activity included the Group's probability assessments of expected future cash flows related to its acquisition of the consulting business of Agile during the earn-out period, appropriately discounted considering the uncertainties associated with the obligation, and calculated in accordance with the terms of the asset purchase agreement (the "Agile Agreement") dated December 12, 2014, as amended on January 26, 2016.

The total gain attributable to changes in the estimated contingent consideration payable for the acquisition of the consulting business of Agile were $0 and $0 for the three and nine months ended December 31, 2019, respectively and $0 and $835 for the three and nine months ended December 31, 2018, respectively. The Group paid no earn-out consideration to Agile in the fiscal year ended March 31, 2019. The Group paid $1,100 to Agile as earn-out consideration in the fiscal year ended March 31, 2018.

During the quarter ended December 31, 2018, the Group and the shareholders of Agile determined that the final earnout targets under the Agile Agreement would not be met and that no further contingent consideration would therefore be due under the Agile Agreement. Accordingly, the accrued contingent consideration has been reversed in the consolidated statements of income during the three and nine months period ended December 31, 2018.

Contingent consideration pertaining to the acquisition of the stock of Exaxe as of March 31, 2019 has been classified under level 3 as the fair value of such contingent consideration has been calculated using one or more significant inputs which are not based on observable market data. The fair value of the contingent consideration was estimated using a discounted cash flow technique with significant inputs that are not observable in the market. The significant inputs not supported by market activity included the Group's probability assessments of expected future cash flows related to its acquisition of the stock of Exaxe during the earn-out period, appropriately discounted considering the uncertainties associated with the obligation, and calculated in accordance with the terms of the share purchase agreement dated November 27, 2018 (the "Exaxe Agreement").

The estimated contingent consideration payable for the acquisition of the stock of Exaxe was $3,007 at December 31, 2019 and $4,884 at March 31, 2019. The long-term contingent consideration has been evaluated for net present value. During the quarter ended December 31, 2019, the Group and the former founders of Exaxe determined that the year 1 earn-out targets under the Exaxe share purchase agreement were not met and that no earn-out was payable to them towards the year 1 earn-out. Accordingly, the accrued deferred payment for year 1 has been reversed in the income statement during the period ended December 31, 2019 and disclosed as a separate line item below the income from operations for the quarter. The total gain attributable to changes in the estimated contingent consideration payable for the acquisition of Exaxe were $1,359 and $1,359 for the three and nine months ended December 31, 2019.

The fair value of derivative financial instruments is determined based on observable market inputs and valuation models. The derivative financial instruments are valued based on valuations received from the relevant counter-party (i.e., bank). The fair value of the foreign exchange forward contract and foreign exchange par forward contract has been determined as the difference between the forward rate on the reporting date and the forward rate on the original transaction, multiplied by the transaction's notional amount (with currency matching).