Fair Value

9 Months Ended

Sep. 30, 2020

7.	Fair Value

The carrying value of financial instruments including cash and cash equivalents, accounts receivable and accounts payable approximates fair values due to the short-term nature of these instruments. Fair value estimates are made at a specific point in time, based on relevant market information.

The FASB Codification defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. On a quarterly basis, the Company measures at fair value certain financial assets, including cash equivalents. Accounting standards specify a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the following fair-value hierarchy:

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Level 1 – quoted prices in active markets for identical assets or liabilities;

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Level 2 – inputs, other than the quoted prices in active markets, that are observable either directly or indirectly;

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Level 3 – unobservable inputs based on the Company’s own assumptions.

Accounting standards permit companies, at their option, to measure certain financial instruments and other eligible items at fair value. The Company has elected not to apply the fair value option to existing eligible items beyond what is required by US GAAP.

The following tables present the fair value hierarchy for those assets measured at fair value on a recurring basis (U.S. dollars in thousands):

	Fair Value at September 30, 2020
	Level 1		Level 2			Level 3		Total
Financial assets (liabilities):
Cash equivalents and current investments	$	45,552	$	—		$	—	$	45,552
Other long-term assets		1,344		—			—		1,344
Derivative financial instruments asset		—		472			—		472
Life insurance contracts		—		—			41,328		41,328
Derivative financial instruments liability		—		(76	)		—		(76	)
Total	$	46,896	$	396		$	41,328	$	88,620

	Fair Value at December 31, 2019
	Level 1		Level 2		Level 3		Total
Financial assets:
Cash equivalents and current investments	$	54,642	$	—	$	—	$	54,642
Other long-term assets		3,216		—		—		3,216
Life insurance contracts		—		—		41,707		41,707
Total	$	57,858	$	—	$	41,707	$	99,565

See Note 9 - Derivatives and Hedging Activities, for more information on derivative financial instruments.

The following table provides a summary of changes in fair value of the Company’s Level 3 marketable securities (U.S. dollars in thousands):

Beginning balance at January 1, 2020	$	41,707
Actual return on plan assets		(379	)
Purchase and issuances		—
Sales and settlements		—
Transfers into Level 3		—
Ending balance at September 30, 2020	$	41,328

- 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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