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Fair Value Measurement

6 Months Ended

Jun. 30, 2022

Note 3. Fair Value Measurement

The Company applies fair value accounting for all financial assets and liabilities. Fair value is an 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 such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an

asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:

Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2—Observable inputs other than Level 1 prices 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 assets or liabilities.

Level 3—Unobservable inputs which 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.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

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 as Level 1 within the fair value hierarchy as the fair value is based on quoted price in active markets. 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 based on other observable inputs, including broker or dealer quotations or alternative pricing sources. When quoted prices in active markets for identical assets or liabilities are not available, the Company relies on non-binding quotes from its investment managers, which are based on proprietary valuation models of independent pricing services. These models generally use inputs such as observable market data, quoted market prices for similar instruments, or historical pricing trends of a security relative to its peers. To validate the fair value determination provided by its investment managers, the Company reviews the pricing movement in the context of overall market trends and trading information from its investment managers. In addition, the Company assesses the inputs and methods used in determining the fair value in order to determine the classification of securities in the fair value hierarchy. As of June 30, 2022 and December 31, 2021, there were no financial instruments classified as Level 3. The Company evaluates transfers between levels at the end of each reporting period and there were no transfers of financial instruments between the fair value measurement levels during the six months ended June 30, 2022.

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


		June 30, 2022
	Fair Value Hierarchy Level	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Financial assets included in cash and cash equivalents
Money market funds	Level 1	$	126,924	$	—	$	—		$	126,924
Financial assets included in short-term investments:
Corporate debt securities	Level 2		1,168				(16	)		1,152
Financial assets included in long-term investments:
Asset backed securities	Level 2		187				(1	)		186
Total		$	128,279	$	—	$	(17	)	$	128,262

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


		December 31, 2021
	Fair Value Hierarchy Level	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Financial assets included within cash and cash equivalents:
Money market funds	Level 1	$	112,193	$	—	$	—		$	112,193
Financial assets included within short-term investments:
Corporate debt securities	Level 2		19,258		1		(6	)		19,253
Commercial paper	Level 2		4,499		—		—			4,499
Asset backed securities	Level 2		4,029		—		(1	)		4,028
Financial assets included within long-term investments:
Corporate debt securities	Level 2		1,185		—		(4	)		1,181
Asset backed securities	Level 2		695		—		—			695
Total		$	141,859	$	1	$	(11	)	$	141,849

- 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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