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Fair Value Measurements | 9 Months Ended
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Jun. 30, 2022
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Fair Value Measurements In accordance with the authoritative guidance on fair value measurements and disclosure under GAAP, the Company determines fair value using a fair value hierarchy that distinguishes between market participant assumptions developed based on market data obtained from sources independent of the reporting entity, and the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances and expands disclosure about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date, essentially the exit price. The levels of fair value hierarchy are: Level 1: Quoted prices in active markets for identical assets and liabilities at the measurement date that the Company has the ability to access. Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3: Unobservable inputs for which there is little or no market data available. These inputs reflect management's assumptions of what market participants would use in pricing the asset or liability. Level 1 investments are valued based on quoted market prices in active markets and include the Company's cash equivalent investments. Level 2 investments, which include investments that are valued based on quoted prices in markets that are not active, broker or dealer quotations, actual trade data, benchmark yields or alternative pricing sources with reasonable levels of price transparency, include the Company's certificates of deposit, corporate bonds and notes, municipal bonds and notes, U.S. government securities, U.S. government agency securities and international government securities. Fair values for the Company's level 2 investments are based on similar assets without applying significant judgments. In addition, all of the Company's level 2 investments have a sufficient level of trading volume to demonstrate that the fair values used are appropriate for these investments. A financial instrument's level within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes "observable" requires significant judgment by the Company. The Company considers observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis The Company's financial assets measured at fair value on a recurring basis subject to the disclosure requirements at June 30, 2022 and September 30, 2021, were as follows (in thousands):
|  |  |  |  |  | Gross Unrealized |  |  |  | Classification on Balance Sheet
As of June 30, 2022 |  | Fair Value Level |  | Cost or Amortized Cost |  | Gains |  | Losses |  | Aggregate Fair Value |  | Cash and Cash Equivalents |  | Short-Term Investments |  | Long-Term Investments
Changes in fair value recorded in other comprehensive income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money Market Funds |  | Level 1 |  | $ | 79,183 |  |  | $ | — |  |  | $ | — |  |  | $ | 79,183 |  |  | $ | 79,183 |  |  | $ | — |  |  | $ | — |
Certificates of deposit |  | Level 2 |  | 250 |  |  | — |  |  | — |  |  | 250 |  |  | — |  |  | 250 |  |  | — |
Corporate bonds and notes |  | Level 2 |  | 93,016 |  |  | 1 |  |  | (1,086) |  |  | 91,931 |  |  | — |  |  | 81,499 |  |  | 10,432 |
Municipal bonds and notes |  | Level 2 |  | 7,661 |  |  | — |  |  | (110) |  |  | 7,551 |  |  | 1,392 |  |  | 4,013 |  |  | 2,146 |
U.S. government securities |  | Level 2 |  | 110,639 |  |  | — |  |  | (979) |  |  | 109,660 |  |  | — |  |  | 106,855 |  |  | 2,805 |
U.S. government agency securities |  | Level 2 |  | 5,647 |  |  | — |  |  | (77) |  |  | 5,570 |  |  | — |  |  | 3,841 |  |  | 1,729 |
Total debt investments |  |  |  | $ | 296,396 |  |  | $ | 1 |  |  | $ | (2,252) |  |  | $ | 294,145 |  |  | $ | 80,575 |  |  | $ | 196,458 |  |  | $ | 17,112 |
Changes in fair value recorded in other net income (expense) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity investments |  | * |  |  |  |  |  |  |  | $ | 2,000 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,000 |
Total equity investments |  |  |  |  |  |  |  |  |  | 2,000 |  |  | — |  |  | — |  |  | 2,000 |
Total investments |  |  |  |  |  |  |  |  |  | $ | 296,145 |  |  | $ | 80,575 |  |  | $ | 196,458 |  |  | $ | 19,112 |
* The fair value of this equity investment is measured at net asset value (NAV) which approximates fair value and is not classified within the fair value hierarchy.
|  |  |  |  |  | Gross Unrealized |  |  |  | Classification on Balance Sheet
As of September 30, 2021 |  | Fair Value Level |  | Cost or Amortized Cost |  | Gains |  | Losses |  | Aggregate Fair Value |  | Cash and Cash Equivalents |  | Short-Term Investments |  | Long-Term Investments
Changes in fair value recorded in other comprehensive income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money Market Funds |  | Level 1 |  | $ | 17,150 |  |  | $ | — |  |  | $ | — |  |  | $ | 17,150 |  |  | $ | 17,150 |  |  | $ | — |  |  | $ | — |
Certificates of deposit |  | Level 2 |  | 255 |  |  | — |  |  | — |  |  | 255 |  |  | — |  |  | 255 |  |  | — |
Corporate bonds and notes |  | Level 2 |  | 243,568 |  |  | 129 |  |  | (86) |  |  | 243,611 |  |  | 4,397 |  |  | 186,107 |  |  | 53,107 |
Municipal bonds and notes |  | Level 2 |  | 24,684 |  |  | 2 |  |  | (9) |  |  | 24,677 |  |  | — |  |  | 13,566 |  |  | 11,111 |
U.S. government securities |  | Level 2 |  | 162,221 |  |  | 14 |  |  | (12) |  |  | 162,223 |  |  | — |  |  | 102,615 |  |  | 59,608 |
U.S. government agency securities |  | Level 2 |  | 36,053 |  |  | — |  |  | (14) |  |  | 36,039 |  |  | — |  |  | 27,087 |  |  | 8,952 |
Total investments |  |  |  | $ | 483,931 |  |  | $ | 145 |  |  | $ | (121) |  |  | $ | 483,955 |  |  | $ | 21,547 |  |  | $ | 329,630 |  |  | $ | 132,778 |
The Company uses the fair value hierarchy for financial assets and liabilities. The carrying amounts of other current financial assets and other current financial liabilities approximate fair value due to their short-term nature. Interest income from investments was not material for the three and nine months ended June 30, 2022 and 2021, respectively. Interest income is included in other income (expense), net on the Company's consolidated income statements. Unrealized losses on investments held for a period greater than 12 months at June 30, 2022 and September 30, 2021 were not material. The Company invests in debt securities that are rated investment grade. The Company reviews the individual debt securities in its portfolio to determine whether a credit loss exists by comparing the extent to which the fair value is less than the amortized cost and considering any changes to ratings of a debt security by a ratings agency. The Company determined that as of June 30, 2022, there were no credit losses on any investments within its portfolio. Assets Measured and Recorded at Fair Value on a Non-Recurring Basis The Company's non-financial assets and liabilities, which include goodwill, intangible assets, and long-lived assets, are not required to be carried at fair value on a recurring basis. These non-financial assets and liabilities are measured at fair value on a non-recurring basis when there is an indicator of impairment, and they are recorded at fair value only when impairment is recognized. The Company reviews goodwill for impairment annually, during the second quarter of each fiscal year, or as circumstances indicate the possibility of impairment. The Company monitors the carrying value of tangible and intangible long-lived assets for impairment whenever events or changes in circumstances indicate its carrying amount may not be recoverable. Included in the Company’s impairment considerations for non-financial assets and liabilities in the current quarter were the potential impacts of the COVID-19 pandemic. As a result of a planned change in the use of the asset, the Company recorded an impairment of $6.2 million against the Shape trade name intangible asset, which was reflected in the Sales and Marketing line item on the Company's consolidated income statement in the first quarter of fiscal 2022. The Company did not recognize any impairment charges related to its intangible assets in the second and third quarters of fiscal 2022 and for the three and nine months ended June 30, 2021. There were no long-lived asset impairment charges for the three and nine months ended June 30, 2022. During the second quarter of 2021, the Company recorded an impairment of $23.5 million against the operating lease right-of-use asset related to the permanent exit of six floors in its corporate headquarters. Impairment charges for the second quarter of fiscal 2021 also included $10.3 million for tenant improvements and other fixed assets associated with the permanently exited floors. In the first quarter of fiscal 2021, the Company recorded an impairment of $6.7 million against the operating lease right-of-use asset related to the integration of the former Shape headquarters in Santa Clara, California. Impairment charges for the first quarter of fiscal 2021 also included $0.2 million for other fixed assets associated with the Shape headquarters in Santa Clara, California. The Company calculated the fair value of the right-of-use assets, tenant improvements and other fixed assets based on estimated future discounted cash flows and classified the fair value as a Level 3 measurement due to the significance of unobservable inputs, which included the amount and timing of estimated sublease rental receipts that the Company could reasonably obtain over the remaining lease term and the discount rate. The impairment charges for the nine months ended June 30, 2021 were allocated to various expense line items on the Company’s consolidated income statements based on the employee base that previously worked out of the exited space. Impairment charges were allocated to the following income statement line items for the three and nine months ended June 30, 2022 and 2021 (in thousands):
|  | Three months ended June 30, |  | Nine months ended June 30,
|  | 2022 |  | 2021 |  | 2022 |  | 2021
Cost of net product revenue |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 2,865 |
Cost of net service revenue |  | — |  |  | — |  |  | — |  |  | 3,492 |
Sales and marketing |  | — |  |  | — |  |  | 6,175 |  |  | 11,515 |
Research and development |  | — |  |  | — |  |  | — |  |  | 12,974 |
General and administrative |  | — |  |  | — |  |  | — |  |  | 9,852 |
Total impairment charges |  | $ | — |  |  | $ | — |  |  | $ | 6,175 |  |  | $ | 40,698 |
During the three and nine months ended June 30, 2022 and 2021, the Company did not recognize any impairment charges related to goodwill.

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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 http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258 + Details
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