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FAIR VALUE MEASUREMENTS | 9 Months Ended
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Sep. 30, 2022
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS. We determine the fair value of our cash equivalents and investments held at fair value using the following broad levels of inputs as defined by related accounting standards: Level 1 – quoted prices in active markets for identical securities. Level 2 – observable inputs other than Level 1 quoted prices including, but not limited to, quoted prices for similar securities, interest rates, prepayment speeds, and credit risk. These inputs are based on market data obtained from independent sources. Level 3 – unobservable inputs reflecting our own assumptions based on the best information available. The inputs into the determination of fair value require significant management judgment or estimation. Investments in this category generally include investments for which there is not an actively-traded market. These levels are not necessarily an indication of the risk or liquidity associated with our investments. The following table summarizes our investments and liabilities that are recognized in our unaudited condensed consolidated balance sheets using fair value measurements determined based on the differing levels of inputs. This table excludes investments held by the consolidated T. Rowe Price investment products which are presented separately on our unaudited condensed consolidated balance sheets and are detailed in Note 5.
| 9/30/2022 |  | 12/31/2021
(in millions) | Level 1 |  | Level 2 |  | Level 3 |  | Level 1 |  | Level 2 |  | Level 3
T. Rowe Price investment products |  |  |  |  |  |  |  |  |  |  |
Cash equivalents held in money market funds | 1,917.3 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,183.9 |  |  | $ | — |  |  | $ | — |
Discretionary investments | 241.4 |  |  | — |  |  | — |  |  | 518.7 |  |  | — |  |  | — |
Seed capital | 147.1 |  |  | 30.0 |  |  | — |  |  | 241.4 |  |  | 23.4 |  |  | — |
Supplemental savings plan liability economic hedges | 669.5 |  |  | — |  |  | — |  |  | 881.5 |  |  | — |  |  | — |
Other investments | .7 |  |  | .1 |  |  | — |  |  | .7 |  |  | .1 |  |  | — |
Investments in affiliated collateralized loan obligations | — |  |  | 6.4 |  |  | — |  |  | — |  |  | 10.8 |  |  | — |
Total | $ | 2,976.0 |  |  | $ | 36.5 |  |  | $ | — |  |  | $ | 2,826.2 |  |  | $ | 34.3 |  |  | $ | — |
Contingent consideration liability | $ | — |  |  | $ | — |  |  | $ | 131.3 |  |  | $ | — |  |  | $ | — |  |  | $ | 306.3 |
The fair value hierarchy level table above does not include the investment partnerships and other investments for which fair value is estimated using their NAV per share as a practical expedient. The carrying value of these investments as disclosed in Note 3 were $91.0 million at September 30, 2022, and $108.1 million at December 31, 2021. As part of the purchase consideration for our acquisition of OHA in December 2021, there was contingent consideration in the amount of up to $900.0 million, payable in cash, that may be due as part of an earnout payment starting in 2025 and ending in 2027 upon satisfying or exceeding certain defined revenue targets. These defined revenue targets will be evaluated on a cumulative basis beginning at the end of 2024, with the ability to extend two additional years if the defined revenue targets are not achieved. About 22% of the earnout is conditioned upon continued service with T. Rowe Price and was excluded from the purchase consideration and deemed compensatory. The fair value of the earnout deemed compensatory is remeasured each reporting period and recognized over the related service period. For the three- and nine- months ended September 30, 2022, $2.9 million and $11.7 million, respectively, was recorded as part of compensation expense in our unaudited condensed consolidated statements of income for the portion of the earnout deemed compensatory. The change in the contingent consideration liability measured at fair value for which we used Level 3 inputs to determine fair value is as follows:
| Contingent Consideration Liability
(in millions) | Three months ended 9/30/2022 | Nine months ended 9/30/2022
Balance at beginning of period | $ | 161.2 |  | $ | 306.3 |
Measurement period adjustment | — |  | (49.3) |
Unrealized (gains) losses, included in earnings | (29.9) |  | (125.7) |
Balance, September 30, 2022 | $ | 131.3 |  | $ | 131.3 |
The fair value of the contingent consideration is measured using the Monte Carlo simulation methodology of valuation. The most significant assumptions used relate to the discount rates and from changes pertaining to the achievement of the defined financial targets. The unrealized (gains) losses during the quarter are reflected in general, administrative and other expenses in our unaudited condensed consolidated statements of income. In addition, simultaneously with the OHA acquisition, a Value Creation Agreement was entered into whereby certain employees of OHA will receive incentive payments in the aggregate equal to 10% of the appreciated value of the OHA business, subject to an annualized preferred return to T. Rowe Price, on the fifth anniversary of the acquisition date. This arrangement is treated as a post-combination compensation expense. This arrangement will be remeasured at fair value at each reporting date and recognized over the related service period. For the three- and nine- months ended September 30, 2022, $2.4 million and $7.1 million was recognized as part of compensation expense in our unaudited condensed consolidated statements of income.

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- 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 Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI https://asc.fasb.org/extlink&oid=126976982&loc=d3e19207-110258 + Details
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