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Fair Value Measurements

9 Months Ended

Sep. 30, 2020

Note 3. Fair Value Measurements

Financial assets and liabilities are recorded at fair value. The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2—Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

Level 3—Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

During the periods presented, the Company has not changed the manner in which it values assets and liabilities that are measured at fair value. The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers within the hierarchy as of September 30, 2020 and December 31, 2019. The following tables set forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

	September 30, 2020
	Total		Level 1		Level 2		Level 3
Money market funds	$	181,303	$	181,303	$	-	$	-
U.S. treasury securities		373,476		-		373,476		-
U.S. government agency securities		34,992		-		34,992		-
Corporate securities and commercial paper		195,361		-		195,361		-
Total assets measured at fair value	$	785,132	$	181,303	$	603,829	$	-

	December 31, 2019
	Total		Level 1		Level 2		Level 3
Money market funds	$	45,498	$	45,498	$	-	$	-
U.S. treasury securities		74,854		-		74,854		-
Corporate securities and commercial paper		67,918		-		67,918		-
Total assets measured at fair value	$	188,270	$	45,498	$	142,772	$	-

Classified as (with contractual maturities):

	September 30, 2020		December 31, 2019
Cash and cash equivalents	$	221,849	$	57,937
Short-term investments (due within one year)		560,583		130,333
Long-term investments (due between one and two years)		2,700		-
Total cash, cash equivalents and investments in marketable securities	$	785,132	$	188,270

Investments in marketable securities are classified as available-for-sale. At September 30, 2020 and December 31, 2019, the balance in the Company’s accumulated other comprehensive income comprised activity related to the Company’s available-for-sale marketable securities. There were immaterial and no realized gains or losses recognized on the sale or maturity of available-for-sale marketable securities as of September 30, 2020 and December 31, 2019, respectively, and as a result, the Company did not reclassify any amounts out of accumulated other comprehensive income for the periods then ended. The Company has a limited number of available-for-sale marketable securities in loss positions as of September 30, 2020, which the Company does not intend to sell and has concluded it will not be required to sell before recovery of the amortized cost for the investment at maturity. The fair value and amortized cost of investments in marketable securities by major security type as of September 30, 2020 and December 31, 2019 are presented in the tables that follow (in thousands):

	Amortized Cost		Unrealized Gain		Unrealized Loss			Fair Value
As of September 30, 2020:
Money market funds	$	181,303	$	-	$	-		$	181,303
U.S. treasury securities		373,423		54		(1	)		373,476
U.S. government agency securities		34,986		6		-			34,992
Corporate securities and commercial paper		195,339		27		(5	)		195,361
Total	$	785,051	$	87	$	(6	)	$	785,132

	Amortized Cost		Unrealized Gain		Unrealized Loss			Fair Value
As of December 31, 2019:
Money market funds	$	45,498	$	-	$	-		$	45,498
U.S. treasury securities		74,801		12		(1	)		74,812
Corporate securities and commercial paper		67,907		55		(2	)		67,960
Total	$	188,206	$	67	$	(3	)	$	188,270

- 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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