Fair value measurements

6 Months Ended

Jun. 30, 2022

5. Fair value measurements

ASC 820, Fair Value Measurement (“ASC 820”), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes between the following:

●

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; and

●

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.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The carrying values reported in the Company’s balance sheets for cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and accrued expenses are reasonable estimates of their fair values due to the short-term nature of these items.

Assets and liabilities measured at fair value on a recurring basis as of June 30, 2022, are as follows (in thousands):


	June 30,
	2022		Level 1		Level 2		Level 3
Assets
Money market funds, included in cash and cash equivalents	$	76,973	$	76,973	$	—	$	—
Money market funds, included in restricted cash		197		197		—		—
Total Assets	$	77,170	$	77,170	$	—	$	—
Liabilities
Derivative liability, included in other long-term liabilities	$	16	$	—	$	—	$	16
Total Liabilities	$	16	$	—	$	—	$	16

Assets measured at fair value on a recurring basis as of December 31, 2021, are as follows (in thousands):


	December 31,
	2021		Level 1		Level 2		Level 3
Assets
Money market funds, included in cash and cash equivalents	$	103,859	$	103,859	$	—	$	—
Money market funds, included in restricted cash		197		197		—		—
Total Assets	$	104,056	$	104,056	$	—	$	—
Liabilities
Derivative liability, included in other long-term liabilities	$	331	$	—	$	—	$	331
Total Liabilities	$	331	$	—	$	—	$	331

- 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.

+ References + Details