CONCENTRATION OF CREDIT RISK AND FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES:

Concentration of Credit Risk and Fair Value of Financial Instruments

Financial instruments that potentially subject us to concentration of credit risk consist primarily of cash equivalents, short-term investments, and accounts receivable. We place our cash equivalents and short-term investments only in highly rated financial instruments and in United States government instruments.

Our accounts receivable are derived principally from patent license and technology solutions agreements. At June 30, 2013, four licensees comprised 95% of our net accounts receivable balance. At December 31, 2012, four licensees represented 96% of our net accounts receivable balance. We perform ongoing credit evaluations of our licensees, who generally include large, multinational, wireless telecommunications equipment manufacturers. We believe that the book values of our financial instruments approximate their fair values.

Fair Value Measurements

Effective January 1, 2008, we adopted the provisions of the FASB fair value measurement guidance that relate to our financial assets and financial liabilities. We adopted the guidance related to non-financial assets and liabilities as of January 1, 2009. We use various valuation techniques and assumptions when measuring fair value of our assets and liabilities. We utilize market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. This guidance established a hierarchy that prioritizes fair value measurements based on the types of input used for the various valuation techniques (market approach, income approach and cost approach). The levels of the hierarchy are described below:

Level 1 Inputs — Level 1 includes financial instruments for which quoted market prices for identical instruments are available in active markets.

Level 2 Inputs — Level 2 includes financial instruments for which there are inputs other than quoted prices included within Level 1 that are observable for the instrument such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets with insufficient volume or infrequent transactions (less active markets) or model-driven valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data, including market interest rate curves, referenced credit spreads and pre-payment rates.

Level 3 Inputs — Level 3 includes financial instruments for which fair value is derived from valuation techniques including pricing models and discounted cash flow models in which one or more significant inputs are unobservable, including the Company’s own assumptions. The pricing models incorporate transaction details such as contractual terms, maturity and, in certain instances, timing and amount of future cash flows, as well as assumptions related to liquidity and credit valuation adjustments of marketplace participants.

Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and financial liabilities and their placement within the fair value hierarchy. We use quoted market prices for similar assets to estimate the fair value of our Level 2 investments. Our financial assets are included within short-term investments on our condensed consolidated balance sheets, unless otherwise indicated. Our financial assets that are accounted for at fair value on a recurring basis are presented in the tables below as of June 30, 2013 and December 31, 2012 (in thousands):



	Fair Value as of June 30, 2013
	Level 1		Level 2		Level 3		Total
Assets:
Money market and demand accounts (a)	$	444,548	$	—	$	—	$	444,548
Mutual and exchange traded funds	100,552		—		—		100,552
Commercial paper (b)	—		163,277		—		163,277
U.S. government securities	—		48,600		—		48,600
Corporate bonds and asset backed securities	—		12,815		—		12,815
	$	545,100	$	224,692	$	—	$	769,792

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(a)	Included within cash and cash equivalents.


(b)	Includes $14.5 million of commercial paper that is included within cash and cash equivalents.



	Fair Value as of December 31, 2012
	Level 1		Level 2		Level 3		Total
Assets:
Money market and demand accounts (a)	$	261,899	$	—	$	—	$	261,899
Mutual and exchange traded funds	100,682		—		—		100,682
Commercial paper (b)	—		150,868		—		150,868
U.S. government securities	—		50,560		—		50,560
Corporate bonds and asset backed securities	—		13,270		—		13,270
	$	362,581	$	214,698	$	—	$	577,279

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(a)	Included within cash and cash equivalents.


(b)	Includes $87.9 million of commercial paper that is included within cash and cash equivalents.

The carrying amount of long-term debt reported in the condensed consolidated balance sheets as of June 30, 2013 and December 31, 2012 was $204.5 million and $200.4 million, respectively. Using inputs such as actual trade data, benchmark yields, broker/dealer quotes and other similar data, which were obtained from independent pricing vendors, quoted market prices or other sources, we determined the fair value of these level 2 Notes (as defined in Note 8 "Long-Term Debt") to be $247.0 million as of June 30, 2013 and $245.2 million as of December 31, 2012.

During first half 2013, we reassessed an investment accounted for under the cost method and concluded that given the entity's current financial position it was necessary to record an impairment of $6.7 million during first quarter 2013, which wrote down our carrying amount of our investment to approximately $15.1 million at June 30, 2013. Given that there are no observable inputs relevant to our investment, we assessed pertinent risk factors, and reviewed a third party valuation that used the discounted cash flow method in order to assign a fair market value to our investment.