4. Fair Value

Financial assets and liabilities, measured at fair value on a recurring basis by level within the fair value hierarchy, consisted of the following (in thousands):


	December 31,				June 30,
	2014				2014
	Level 1		Level 3		Level 1		Level 3
Assets:
Money market funds	$	133,061	$	—	$	439,675	$	—
Auction rate securities		—		15,278		—		19,785

Total available-for-sale securities	$	133,061	$	15,278	$	439,675	$	19,785

Liabilities:
Contingent consideration liabilities recorded for business combinations	$	—	$	69,306	$	—	$	110,122

In our condensed consolidated balance sheets as of December 31, 2014 and June 30, 2014, money market balances were included in cash and cash equivalents and auction rate securities, or ARS investments, were included in non-current investments; $600,000 of the ARS investments were included in prepaid expenses and other current assets as of December 31, 2014. The contingent consideration liability recorded for business combinations was included in acquisition-related liabilities as of December 31, 2014 and June 30, 2014, respectively.

Changes in fair value of our Level 3 financial assets as of December 31, 2014 were as follows (in thousands):


Balance as of June 30, 2014	$	19,785
Net gain		393
Redemptions		(4,900	)

Balance as of December 31, 2014	$	15,278

Changes in fair value of our Level 3 contingent consideration liabilities as of December 31, 2014 were as follows (in thousands):


Balance as of June 30, 2014	$	110,122
Cash settlement of contingent consideration liability		(7,706	)
Issuance of common stock in settlement of liability		(21,487	)
Accretion and remeasurement		(11,623	)

Balance as of December 31, 2014	$	69,306

In connection with our acquisition of Validity Sensors, Inc., or Validity, we entered into a contingent consideration arrangement and as of December 31, 2014, we may be required to make additional cash payments of up to $130.9 million as consideration to the former Validity stockholders and option holders based on unit sales of products utilizing Validity technology through March 2016.

In connection with our acquisition of Pacinian Corporation, or Pacinian, we entered into a contingent consideration arrangement. As of December 31, 2014, we may be required to make additional cash payments of up to $10.0 million as consideration to the former Pacinian stockholders based on unit sales of products utilizing ThinTouch technology through June 2016.

Changes in the fair value of our contingent consideration liabilities subsequent to the acquisition are included in operating expenses as change in contingent consideration in the condensed consolidated statements of income. Cash payments of contingent consideration are classified in the condensed consolidated statements of cash flows as a financing activity up to the amount of the contingent consideration recorded at the time of the acquisition, and as an operating activity for cash payments that exceed the liability recorded at the time of acquisition.

There were no transfers in or out of our Level 1, 2, or 3 assets or liabilities during the three and six months ended December 31, 2014 and 2013.

The fair values of our accounts receivable and accounts payable approximate their carrying values because of the short-term nature of those instruments. Intangible assets, property and equipment, and goodwill are measured at fair value on a non-recurring basis if impairment is indicated. Our bank debt is subject to a variable interest rate, which is subject to change from time to time to reflect a market interest rate; accordingly, the carrying value of our bank debt approximates fair value.