5.	Fair value of financial instruments

Fair value is defined 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. A fair value hierarchy is established which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs for the valuation of an asset or liability as of measurement date. The three levels of inputs that may be used to measure fair value are defined as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for assets or liabilities, either directly or indirectly. If the assets or liabilities have a specified (contractual) term, Level 2 inputs must be observable for substantially the full term of assets or liabilities.

Level 3 inputs are unobservable inputs for assets or liabilities, which require the reporting entity to develop its own valuation techniques and assumptions.

The Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

The following table provides details of the financial instruments measured at fair value on a recurring basis, including:


	Fair Value Measurements at Reporting Date Using
(amount in thousands)	Level 1		Level 2			Level 3		Total
As of December 30, 2016
Assets
Cash equivalents	$	—	$	3,752		$	—	$	3,752
Corporate bonds and commercial papers		—		114,654			—		114,654
U.S. agency and U.S. treasury securities		—		54,112			—		54,112
Sovereign and municipal securities		—		1,742			—		1,742

Total	$	—	$	174,260		$	—	$	174,260

Liabilities
Derivative liabilities	$	—	$	1	⁽¹⁾	$	—	$	1

Total	$	—	$	1		$	—	$	1


	Fair Value Measurements at Reporting Date Using
(amount in thousands)	Level 1		Level 2			Level 3		Total
As of June 24, 2016
Assets
Cash equivalents	$	—	$	6,050		$	—	$	6,050
Corporate bonds and commercial papers		—		112,522			—		112,522
U.S. agency and U.S. treasury securities		—		28,030			—		28,030
Sovereign and municipal securities		—		1,157			—		1,157
Derivative assets		—		158	⁽²⁾		—		158

Total	$	—	$	147,917		$	—	$	147,917

Liabilities
Derivative liabilities	$	—	$	1,754	⁽³⁾	$	—	$	1,754

Total	$	—	$	1,754		$	—	$	1,754

⁽¹⁾	Foreign currency forward contracts with notional amount of Canadian dollars 0.2 million.

⁽²⁾	Foreign currency forward contracts with notional amount of $7.0 million.

⁽³⁾	Foreign currency forward contracts with notional amount of $77.5 million and Canadian dollars 0.6 million.

Derivative Financial Instruments

As a result of foreign currency rate fluctuations, the U.S. dollar equivalent values of the Company’s foreign currency denominated assets and liabilities change. The Company uses foreign currency contracts to manage the foreign exchange risk associated with certain foreign currency denominated assets and liabilities and other foreign currency transactions. The Company minimizes the credit risk in derivative instruments by limiting its exposure to any single counterparty and by entering into derivative instruments only with counterparties that meet the Company’s minimum credit quality standard. As of December 30, 2016, the Company recognized the fair value of foreign currency forward contracts of $0.001 million as derivative liabilities in the unaudited condensed consolidated balance sheet. As of June 24, 2016, the Company recognized the fair value of foreign currency forward contracts of $0.2 million as derivative assets and $1.7 million as derivative liabilities in the unaudited condensed consolidated balance sheet under other current assets and accrued expenses, respectively.

As of December 30, 2016, the Company had no foreign currency forward contracts designated as cash flow hedges. During the six months ended December 30, 2016, the Company discontinued cash flow hedges and recognized a gain from unwinding foreign currency forward contracts of $0.3 million in the unaudited condensed consolidated statements of operations and comprehensive income.

As of December 30, 2016, the Company had one outstanding foreign currency forward contract with a notional amount of Canadian dollars 0.2 million, maturing in March 2017. This foreign currency forward contract was not designated for hedge accounting and was used to hedge fluctuations in the U.S. dollar value of forecasted transactions denominated in Canadian dollar. During the six months ended December 30, 2016, the Company included unrealized loss of $0.001 million from changes in the fair value of foreign currency contracts in earnings in the unaudited condensed consolidated statements of operations and comprehensive income.

As of December 25, 2015, the Company had 32 outstanding foreign currency forward contracts with an aggregate notional amount of $181.5 million and Canadian dollars 0.4 million, maturing during December 2015 to December 2016. These foreign currency forward contracts were not designated for hedge accounting and were used to hedge fluctuations in the U.S. dollar value of forecasted transactions denominated in Thai baht and Canadian dollar. During the six months ended December 25, 2015, the Company included unrealized loss of $6.2 million from changes in the fair value of foreign currency contracts in earnings in the unaudited condensed consolidated statements of operations and comprehensive income.