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Fair Value Measurements | 9 Months Ended
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Aug. 31, 2013
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Fair Value Measurements Recurring Fair Value Measurements The following table details the fair value measurements within the fair value hierarchy of our financial assets and liabilities at August 31, 2013 (in thousands):
|  |  | Fair Value Measurements Using
| Total Fair Value |  | Level 1 |  | Level 2 |  | Level 3
Assets |  |  |  |  |  |  |
Money market funds | $ | 58,914 |  |  | $ | 58,914 |  |  | $ | — |  |  | $ | — |
State and municipal bond obligations | 26,640 |  |  | — |  |  | 26,640 |  |  | — |
Auction rate securities – municipal bonds | 23,707 |  |  | — |  |  | — |  |  | 23,707 |
Auction rate securities – student loans | 2,866 |  |  | — |  |  | — |  |  | 2,866 |
Foreign exchange derivatives | (87 | ) |  | — |  |  | (87 | ) |  | — |
Liabilities |  |  |  |  |  |  |
Contingent consideration | $ | 383 |  |  | $ | — |  |  | $ | — |  |  | $ | 383 |
The following table details the fair value measurements within the fair value hierarchy of our financial assets at November 30, 2012 (in thousands):
|  |  | Fair Value Measurements Using
| Total Fair Value |  | Level 1 |  | Level 2 |  | Level 3
Money market funds | $ | 125,591 |  |  | $ | 125,591 |  |  | $ | — |  |  | $ | — |
State and municipal bond obligations | 50,818 |  |  | — |  |  | 50,818 |  |  | — |
Auction rate securities – municipal bonds | 23,420 |  |  | — |  |  | — |  |  | 23,420 |
Auction rate securities – student loans | 2,901 |  |  | — |  |  | — |  |  | 2,901 |
Corporate bonds | 2,607 |  |  | — |  |  | 2,607 |  |  | — |
Foreign exchange derivatives | (186 | ) |  | — |  |  | (186 | ) |  | — |
When developing fair value estimates, we maximize the use of observable inputs and minimize the use of unobservable inputs. When available, we use quoted market prices to measure fair value. The valuation technique used to measure fair value for our Level 1 and Level 2 assets is a market approach, using prices and other relevant information generated by market transactions involving identical or comparable assets. If market prices are not available, the fair value measurement is based on models that use primarily market based parameters including yield curves, volatilities, credit ratings and currency rates. In certain cases where market rate assumptions are not available, we are required to make judgments about assumptions market participants would use to estimate the fair value of a financial instrument. The valuation technique used to measure fair value for our Level 3 assets, which consists of our ARS, is primarily an income approach, where the expected weighted average future cash flows are discounted back to present value for each asset. The significant unobservable inputs used in the fair value measurement of our ARS are the probability of earning the maximum rate until maturity, the probability of principal return prior to maturity, the probability of default, the liquidity risk premium and the recovery rate in default. Generally, interrelationships are such that a change in the assumptions used for the probability of principal return prior to maturity is accompanied by a directionally opposite change in one or more the following assumptions: the probability of earning the maximum rate until maturity, the probability of default and the liquidity risk premium. The recovery rate in default is somewhat independent and based upon the ARS' specific underlying assets and published recovery rate studies. One issuer of our ARS is currently in default, but the underlying bond insurer is making interest payments on the issuer's behalf. In this situation, we used a market approach, where the significant unobservable inputs are the market credit default swap spread and the credit rating of the insurer. The following table provides additional quantitative information about the unobservable inputs used in our Level 3 asset valuations as of August 31, 2013:
| Valuation Technique |  | Unobservable Input |  | Range (Weighted Average)
Auction rate securities | Discounted cash flow |  | Probability of earning the maximum rate until maturity |  | 0.2% - 9.9% (1.7%)
|  |  | Probability of principal return prior to maturity |  | 75.7% - 95.1% (87.0%)
|  |  | Probability of default |  | 4.1% - 24.1% (11.3%)
|  |  | Liquidity risk premium |  | 4.0%
|  |  | Recovery rate in default |  | 50% - 70% (56.5%)
| Market valuation |  | Market credit default swap spread of insurer |  | 4.05%
|  |  | Credit rating of insurer |  | AA-
Significant increases or decreases in the underlying assumptions used to value the ARS could significantly increase or decrease the fair value estimates recorded in the consolidated balance sheets. The following table reflects the activity for our financial assets measured at fair value using Level 3 inputs for each period presented (in thousands):
| Three Months Ended |  | Nine Months Ended
| August 31, 2013 |  | August 31, 2012 |  | August 31, 2013 |  | August 31, 2012
Balance, beginning of period | $ | 26,500 |  |  | $ | 31,448 |  |  | $ | 26,321 |  |  | $ | 33,539 |
Redemptions and repurchases | — |  |  | — |  |  | (25 | ) |  | (225 | )
Transfer to Level 2 fair value measurement | — |  |  | — |  |  | — |  |  | (2,700 | )
Unrealized gains (losses) included in accumulated other comprehensive loss | 73 |  |  | (163 | ) |  | 277 |  |  | 671 |
Balance, end of period | $ | 26,573 |  |  | $ | 31,285 |  |  | $ | 26,573 |  |  | $ | 31,285 |
During the second quarter of fiscal year 2012, we received a redemption notice for one of our ARS at par value. We transferred the ARS to a Level 2 fair value measurement, as the value at May 31, 2012 was based on observable inputs. The ARS was redeemed in the third quarter of fiscal year 2012. We have classified contingent consideration related to the Rollbase, Inc. acquisition (Rollbase), which occurred in the second quarter of fiscal year 2013 (Note 7), within Level 3 of the fair value hierarchy because the fair value is derived using significant unobservable inputs, which include discount rates and probability-weighted cash flows. We determined the fair value of our contingent consideration obligations based on a probability-weighted income approach derived from probability assessments of the attainment of certain milestones. We establish discount rates to be utilized in our valuation models based on the cost to borrow that would be required by a market participant for similar instruments. In determining the probability of attaining certain milestones, we utilize data regarding similar milestone events from our own experience. On a quarterly basis, we reassess the probability factors associated with the milestones for our contingent consideration obligations. Significant judgment is employed in determining the appropriateness of these key assumptions as of the acquisition date and for each subsequent period. The key assumptions as of August 31, 2013 related to the contingent consideration for the acquisition of Rollbase used in the model are probabilities in excess of 95% that the milestones associated with the contingent consideration will be achieved and a discount rate of 4.8%. A decrease in the probabilities of achievement could result in a significant decrease to the estimated fair value of the contingent consideration liability. During the three and nine months ended August 31, 2013, the change in the fair value of the liability was minimal. Nonrecurring Fair Value Measurements The following table details our nonrecurring fair value measurements at November 30, 2012 (in thousands):
|  |  | Fair Value Measurements Using |  |
| Total Fair Value |  | Level 1 |  | Level 2 |  | Level 3 |  | Total Losses
Disposal group | $ | 16,487 |  |  | $ | — |  |  | $ | 16,487 |  |  | $ | — |  |  | $ | 8,601 |
The disposal group included the assets and liabilities held for sale of the Artix, Orbacus and Orbix product lines, which had a fair value of $16.5 million as of November 30, 2012. The carrying value at November 30, 2012 of $25.1 million was written down to fair value, less costs to sell, resulting in a loss of $8.6 million. The loss was recorded in income (loss) from discontinued operations in fiscal year 2012. The assets and liabilities held for sale were divested in the first quarter of fiscal year 2013 (Note 6). We evaluate all of our assets held for sale using undiscounted cash flow models or other valuation models, such as comparative transactions and market multiples, to determine their fair values. However, a market approach was more heavily used to value the assets held for sale related to the divestitures of our non-core product lines. As bid and transaction values became apparent as we moved through the marketing and divestiture process, the fair values of the assets held for sale were established. The impairment loss recorded for the Artix, Orbacus and Orbix product lines was primarily based on our expectations of a sale price as compared to our estimation of the net assets to be sold at closing.

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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/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15A -Subparagraph a-d -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. 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