Fair Value of Financial Instruments

9 Months Ended

Sep. 29, 2018

9. Fair Value of Financial Instruments

ASC Topic 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 measurement), then priority to quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market (Level 2 measurement), then the lowest priority to unobservable inputs (Level 3 measurement).

The following table shows CRA’s financial instruments as of September 29, 2018 and December 30, 2017 that are measured and recorded in the financial statements at fair value on a recurring basis (in thousands):


	September 29, 2018
	Quoted Prices in Active				Significant
	Markets for Identical		Significant Other		Unobservable
	Assets or Liabilities		Observable Inputs		Inputs
	Level 1		Level 2		Level 3
Assets:
Money market funds	$	29	$	—	$	—
Total Assets	$	29	$	—	$	—
Liabilities:
Contingent consideration liability	$	—	$	—	$	5,564
Total Liabilities	$	—	$	—	$	5,564


	December 30, 2017
	Quoted Prices in Active				Significant
	Markets for Identical		Significant Other		Unobservable
	Assets or Liabilities		Observable Inputs		Inputs
	Level 1		Level 2		Level 3
Assets:
Money market funds	$	5,006	$	—	$	—
Total Assets	$	5,006	$	—	$	—
Liabilities:
Contingent consideration liability	$	—	$	—	$	5,137
Total Liabilities	$	—	$	—	$	5,137

The fair values of CRA’s money market funds are based on quotes received from third-party banks. The carrying value of CRA’s revolving line of credit approximates the fair value based upon the short-term nature of the arrangement and the variable interest rate.

The contingent consideration liability in the tables above is for estimated future contingent consideration payments related to a prior acquisition. These deferred payments are recorded at fair value at the time of acquisition and are included in other current and/or non-current liabilities on our consolidated balance sheet. The fair value of the contingent consideration is determined using the Monte Carlo simulation (in a risk-neutral framework). The fair value of this liability is based on significant inputs not observed in the market, such as internally generated projections of future profitability, as well as related volatility and discount rates, and thus represent a Level 3 measurement. The fair value of this contingent acquisition liability is reassessed on a quarterly basis by CRA using additional information as it becomes available, and any change in the fair value estimates are recorded in cost of services on the condensed consolidated income statement of that period.

The following table summarizes the changes in the contingent consideration liabilities over the fiscal year-to-date period ended September 29, 2018 and the fiscal year ended December 30, 2017 (in thousands):


	September 29,		December 30,
	2018		2017
Beginning balance	$	5,137	$	549
Acquisitions		—		2,357
Remeasurement of acquisition-related contingent consideration		(281)		1,155
Accretion		708		1,328
Payments		—		(299)
Effect of foreign currency translation		—		47
Ending balance	$	5,564	$	5,137

- 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.

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