Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2022

(3) FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of the Company’s financial assets and liabilities are determined in accordance with the fair value hierarchy established in ASC 820, Fair Value Measurements and Disclosures. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy of ASC 820 requires an entity to maximize the use of observable inputs when measuring fair value and classifies those inputs into three levels:

Level 1—Observable inputs, such as quoted prices in active markets;

Level 2—Inputs, other than the quoted prices in active markets, which are observable either directly or indirectly such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the instrument’s anticipated life; and

Level 3—Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

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 classifies money market funds and U.S. treasury securities as Level 1 within the fair value hierarchy as the fair value is based on quoted prices. The Company classifies its investments in corporate debt securities, commercial paper, and asset-backed securities as Level 2 within the fair value hierarchy as the fair value is estimated by using quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs obtained from various third-party data providers, including but not limited to benchmark yields, reported trades and broker/dealer quotes. Where applicable the market approach utilizes prices and information from market transactions for similar or identical assets.

The following table presents the Company's investments, which consist of cash equivalents and investments classified as available-for-sale investments, that are measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 (in thousands):


	June 30, 2022
	Fair Value Hierarchy Level	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Money market funds	Level 1	$	55,205	$	—	$	—		$	55,205
U.S. Treasury securities	Level 1		96,129		—		(676	)		95,453
Corporate debt securities	Level 2		68,661		—		(495	)		68,166
Commercial paper	Level 2		74,359		—		—			74,359
Asset-backed securities	Level 2		9,053		—		(43	)		9,010
Long-term investments
U.S. Treasury securities	Level 1		—		—		—			—
Corporate debt securities	Level 2		10,902		—		(42	)		10,860
Total		$	314,309	$	—	$	(1,256	)	$	313,053


	December 31, 2021
	Fair Value Hierarchy Level	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Money market funds	Level 1	$	357,181	$	—	$	—	$	357,181

The fair value of cash equivalents and available-for-sale investments by classification included in the condensed consolidated balance sheets was as follows (in thousands):


	June 30,		December 31,
	2022		2021
Cash and cash equivalents	$	55,205	$	357,181
Short-term investments		246,988		—
Long-term investments		10,860		—
Total	$	313,053	$	357,181

Cash and cash equivalents in the above table excludes bank account cash of $11.2 million and $6.5 million as of June 30, 2022 and December 31, 2021, respectively.

The fair value of cash equivalents and available-for-sale investments by contractual maturity was as follows (in thousands):


	June 30,		December 31,
	2022		2021
Maturing in one year or less	$	302,193	$	357,181
Maturing after one year through five years		10,860		—
Total	$	313,053	$	357,181

The primary objective of the Company's investment portfolio is to maintain safety of principal, prudent levels of liquidity and acceptable levels of risk. The Company's investment policy limits investments to certain types of instruments issued by institutions with investment-grade credit ratings, and it places restrictions on maturities and concentration by asset class and issuer.

There were no transfers of financial instruments between the fair value measurement levels during the three months and six months ended June 30, 2022 and 2021 and there were no financial instruments classified as Level 3 as of June 30, 2022.

As of June 30, 2022, accrued interest receivable related to the Company's investments was $0.9 million and was included in prepaid expenses and other current assets on the condensed consolidated balance sheet.

As of June 30, 2022, the unrealized losses for available-for-sale investments were non-credit related and the Company does not intend to sell the investments that were in an unrealized loss position, nor will it be required to sell those investments before recovery of their amortized costs basis, which may be maturity. As of June 30, 2022, no allowance for credit losses for the Company's investments was recorded. During the three months and six months ended June 30, 2022, the Company did not recognize any impairment losses related to investments.

- 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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