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Fair Value Measurement
 9 Months Ended
Sep. 30, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurement Fair Value Measurement

Fair value is defined as the price that would be received to sell an asset or paid to settle a liability in an orderly transaction between market participants at the measurement date. Accounting standards utilize a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels, which are described below:

•
Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets;
•
Level 2 – Observable inputs other than quoted prices that are either directly or indirectly observable for the asset or liability;
•
Level 3 – Unobservable inputs that are supported by little or no market activity.

These levels are not necessarily an indication of the risk of liquidity associated with the financial assets or liabilities disclosed. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement, as required under ASC 820-10, ‘‘Fair Value Measurement.’’

Derivative instruments

Laureate uses derivative instruments as economic hedges for bank debt, foreign exchange fluctuations and interest rate risk. Their values are derived using valuation models commonly used for derivatives. These valuation models require a variety of inputs, including contractual terms, market prices, forward-price yield curves, notional quantities, measures of volatility and correlations of such inputs. Our valuation models also reflect measurements for credit risk. Laureate concluded that the fair values of our derivatives are based on unobservable inputs, or Level 3 assumptions. The significant unobservable input used in the fair value measurement of the Company's derivative instruments is our own credit risk. Holding other inputs constant, a significant increase (decrease) in our own credit risk would result in a significantly lower (higher) fair value measurement for the Company's derivative instruments.

Equity securities - preferred stock investment

In 2013, Laureate purchased approximately 1,020 shares (the Shares) of preferred stock of a private education company for $5,000. This equity security did not have a readily determinable fair value. In June 2019, based on interest expressed by an investor to purchase the Shares, Laureate recorded this investment at its estimated fair value and recorded a non-operating gain of approximately $6,100. In September 2019, Laureate sold the Shares and received cash proceeds of $11,473, resulting in a total non-operating gain of $6,473 for the nine months ended September 30, 2019. The proceeds are included in Proceeds from sale of investment in the consolidated statement of cash flows.

Laureate’s financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2019 were as follows:
 
Total
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
Derivative instruments
$
295

 
$
—

 
$
—

 
$
295

Liabilities
 
 
 
 
 
 
 
Derivative instruments
$
11

 
$
—

 
$
—

 
$
11


Laureate’s financial assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2018 were as follows:
 
Total
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
Derivative instruments
$
3,259

 
$
—

 
$
—

 
$
3,259

Liabilities
 
 
 
 
 
 
 
Derivative instruments
$
10,677

 
$
—

 
$
—

 
$
10,677



The changes in our Level 3 Derivative instruments measured at fair value on a recurring basis for the nine months ended September 30, 2019 were as follows:
Balance at December 31, 2018
$
(7,418
)
Gain included in earnings:
 
Unrealized gains, net
4,305

Realized gains, net
3,794

 Included in other comprehensive income
(7,950
)
    Settlements
(4,634
)
Reclassification, currency translation adjustment and other
12,187

Balance at September 30, 2019
$
284


The following table presents quantitative information regarding the significant unobservable inputs and valuation techniques utilized in the fair value measurements of the Company's assets/(liabilities) classified as Level 3 as of September 30, 2019:
 
Fair Value at September 30, 2019
Valuation Technique
Unobservable Input
 
Range/Input Value
Derivative instruments - cross currency swaps
$
284

Discounted Cash Flow
Credit Risk
 
3.50%