Our financial assets and (liabilities) carried at fair value measured on a recurring basis as of December 31, 2021 and 2020, consisted of the following (in thousands):

(1)	The fair value of the interest rate contracts is determined using Level 2 fair value inputs and is recorded as accrued expenses or other long-term obligations in the consolidated balance sheets.

(2)

The fair value of the foreign currency contract assets (including those designated as hedging instruments and those not designated as hedging instruments) is determined using Level 2 fair value inputs and is recorded as prepaid and other assets or other long-term assets in the consolidated balance sheets.

(3)

The fair value of the foreign currency contract liabilities (including those designated as hedging instruments and those not designated as hedging instruments) is determined using Level 2 fair value inputs and is recorded as accrued expenses or other long-term obligations in the consolidated balance sheets.

Certain of our business combinations involve the potential for the payment of future contingent consideration, generally based on a percentage of future product sales or upon attaining specified future revenue or other milestones. Contingent consideration liabilities are re-measured to fair value at each reporting period, with the change in fair value recognized within operating expenses in the accompanying consolidated statements of income (loss). We measure the initial liability and re-measure the liability on a recurring basis using Level 3 inputs as defined under authoritative guidance for fair value

measurements. Changes in the fair value of our contingent consideration liabilities during the years ended December 31, 2021 and 2020, consisted of the following (in thousands):


	2021		2020
Beginning balance	$	55,750	$	76,709
Contingent consideration expense (benefit)		3,161		(7,960)
Contingent payments made		(10,665)		(13,100)
Effect of foreign exchange		(12)		101
Ending balance	$	48,234	$	55,750

As of December 31, 2021, $13.5 million was included in other long-term obligations and approximately $34.7 million was included in accrued expenses in our consolidated balance sheet related to contingent liabilities. As of December 31, 2020, $36.9 million was included in other long-term obligations and $18.8 was included in accrued expenses in our consolidated balance sheet related to contingent liabilities. Cash paid to settle contingent consideration liabilities recognized at fair value as of the acquisition date has been reflected as a cash outflow from financing activities in the accompanying consolidated statements of cash flows.

The recurring Level 3 measurement of our contingent consideration liabilities includes the following significant unobservable inputs at December 31, 2021 and 2020 (amounts in thousands):


	Fair value at
	December 31,		Valuation			Weighted
Contingent consideration liability	2021		technique	Unobservable inputs	Range	Average⁽¹⁾
Revenue-based royalty payments contingent liability	$	2,870	Discounted cash flow	Discount rate	13% - 16%	14.7%
				Projected year of payments	2022-2034	2026

Revenue milestones contingent liability	$	41,671	Monte Carlo simulation	Discount rate	7.5% - 12.5%	8.2%
				Projected year of payments	2022-2031	2022

Regulatory approval contingent liability	$	3,693	Scenario-based method	Discount rate	2.6%
				Probability of milestone payment	80%
				Projected year of payment	2024-2025	2025

(1)	Unobservable inputs were weighted by the relative fair value of the instruments. No weighted average is reported for contingent consideration liabilities without a range of unobservable inputs.


	Fair value at
	December 31,		Valuation			Weighted
Contingent consideration liability	2020		technique	Unobservable inputs	Range	Average⁽¹⁾
Revenue-based royalty payments contingent liability	$	4,545	Discounted cash flow	Discount rate	12% - 15%	13.5%
				Projected year of payments	2021-2034	2026

Revenue milestones contingent liability	$	46,305	Monte Carlo simulation	Discount rate	7.5% - 12%	9.0%
				Projected year of payments	2021-2030	2022

Regulatory approval contingent liability	$	4,900	Scenario-based method	Discount rate	1%
				Probability of milestone payment	100%
				Projected year of payment	2021-2024	2022

(1)	Unobservable inputs were weighted by the relative fair value of the instruments. No weighted average is reported for contingent consideration liabilities without a range of unobservable inputs.

The contingent consideration liabilities are re-measured to fair value each reporting period using projected revenues, discount rates, probabilities of payment, and projected payment dates. Projected contingent payment amounts are discounted back to the current period using a discounted cash flow model. Projected revenues are based on our most recent internal operational budgets and long-range strategic plans. An increase (decrease) in either the discount rate or the time to payment, in isolation, may result in a significantly lower (higher) fair value measurement. A decrease (increase) in the probability of any milestone payment may result in lower (higher) fair value measurements. Our determination of the fair value of contingent consideration liabilities could change in future periods based upon our ongoing evaluation of these significant unobservable inputs. We intend to record any such change in fair value to operating expenses in our consolidated statements of income (loss).

Contingent Payments to Related Parties. During the years ended December 31, 2020 and 2019, we made contingent payments of approximately $800,000 and $1.0 million to a current director of Merit and former shareholder of Cianna Medical which we acquired in 2018. We made no such payments in 2021. In 2022, the Company expects to make additional payments consistent with prior years. The terms of the acquisition, including contingent consideration payments, were determined prior to the appointment of the former Cianna Medical shareholder as a director of Merit. As a former shareholder of Cianna Medical, the Merit director may be eligible for additional payments for the achievement of sales milestones specified in our merger agreement with Cianna Medical.

Fair Value of Other Financial Instruments

The carrying amount of cash and cash equivalents, receivables, and trade payables approximate fair value because of the immediate, short-term maturity of these financial instruments. Our long-term debt re-prices frequently due to variable rates and entails no significant changes in credit risk and, as a result, we believe the fair value of long-term debt approximates carrying value. The fair value of assets and liabilities whose carrying value approximates fair value is determined using Level 2 inputs, with the exception of cash and cash equivalents, which are Level 1 inputs.

Impairment Charges

We recognize or disclose the fair value of certain assets, such as non-financial assets, primarily property and equipment, intangible assets and goodwill in connection with impairment evaluations. All of our nonrecurring valuations use significant unobservable inputs and therefore fall under Level 3 of the fair value hierarchy.

Intangible Assets. During the years ended December 31, 2021, 2020 and 2019, we had losses of $1.6 million, $28.7 million and $3.3 million, respectively, related to certain acquired intangible assets (see Note 5).

Right of Use Operating Lease Assets. During the years ended December 31, 2021 and 2020, we identified changes in events and circumstances relating to certain right-of-use (“ROU”) operating lease assets. We compared the anticipated undiscounted cash flows generated by a sublease to the carrying value of the ROU operating lease and related long-lived assets and determined that the carrying values were not recoverable. Consequently, we recorded impairment losses during the years ended December 31, 2021 and 2020 of $1.4 million and $1.5 million, respectively, which is equal to the excess of the carrying value of the assets over their estimated fair value. The impairment losses in both periods were driven primarily by site consolidation decisions and changes in our projected cash flows for the ROU operating lease asset and related long-lived assets, due to changes in the real estate market as a result of the COVID-19 pandemic. These changes include an increase in the anticipated time to identify a lessee, an increase in anticipated lease concessions, and a decrease in the expected lease rates for the property. The ROU operating lease asset impairment losses in both 2021 and 2020 pertained to our cardiovascular segment.

Property and Equipment. During the year ended December 31, 2021, we had losses of $1.3 million related to the measurement of property and equipment at fair value based on the planned discontinuance of the Advocate™ Peripheral Angioplasty Balloon product line, sold under our license agreements with ArraVasc, which pertained to our cardiovascular segment. During the year ended December 31, 2020, we had losses of $359,000 related to the measurement of certain property and equipment measured at fair value based on restructuring activities associated with the suspension of our distribution agreement with NinePoint, which pertained to our endoscopy segment.

Equity Investments, Purchase Options and Notes Receivable. During the year ended December 31, 2020, we recognized $2.5 million of impairment expense related to our equity method investment in the 19.5 percent ownership in preferred shares of Fusion Medical, Inc. (“Fusion”) due to uncertainty about future product development and commercialization associated with the technologies and a charge of $3.5 million related to Bluegrass Vascular due to our decision not to exercise our option to purchase the company. Our equity investments in privately held companies, including options to acquire these companies, were $14.7 million and $12.0 million at December 31, 2021 and 2020, respectively, which are included within other long-term assets in our consolidated balance sheets. We analyze our investments in privately held companies to determine if they should be accounted for using the equity method based on our ability to exercise significant influence over operating and financial policies of the investment. Investments not accounted for under the equity method of accounting are accounted for at cost minus impairment, if applicable, plus or minus changes in valuation resulting from observable transactions for identical or similar investments.

Prior to the adoption of ASU 2016-13 on January 1, 2020, we assessed the credit support available for notes receivable and the value of any underlying collateral to determine if there were any other-than temporary impairments. Credit losses represent the difference between the present value of cash flows expected to be collected on these notes receivable and the amortized cost basis. For the year ended December 31, 2019, we recorded impairment charges of $20.5 million due to our write-off of our NinePoint note receivable and purchase option due to our assessment of the collectability of the note receivable and management’s decision not to exercise our option to purchase this business. We also wrote off $1.6 million of accrued interest related to the note receivable reported in interest income in the consolidated statements of income (loss) for the year ended December 31, 2019. We recorded interest income of $0.4 million and $0.3 million during the years ended December 31, 2021 and 2020, respectively, for partial recoveries of this interest.

Current Expected Credit Losses

Our outstanding long-term notes receivable, including accrued interest and our allowance for current expected credit losses, were $2.3 million and $2.2 million, as of December 31, 2021 and 2020, respectively. As of December 31, 2021 and 2020, we had an allowance for current expected credit losses of $199,000 and $730,000, respectively, associated with these notes receivable and in 2020 our contractual obligation to extend credit to Selio, which they exercised during the year ended December 31, 2021. We assess the allowance for current expected credit losses on an individual security basis, due to the limited number of securities, using a probability of default model, which is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the expected collectability of securities. During the year ended December 31, 2021, we collected $2.8 million from Bluegrass Vascular which represents the entire principal balance and all accrued interest.

The table below presents a rollforward of the allowance for current expected credit losses on our notes receivable for the years ended December 31, 2021 and 2020 (in thousands):


	2021		2020
Beginning balance	$	730	$	—
Cumulative effect adjustment upon adoption of ASU 2016-13, Credit Losses		—		575
Provision for credit loss - expense (benefit)		(531)		155
Ending balance	$	199	$	730