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Fair Value Measurements
 12 Months Ended
Dec. 31, 2015
Fair Value Measurements [Abstract]  
Fair Value Measurements

Note 19 Fair Value Measurements

 

ASC 820, “Fair Value Measurements and Disclosures,” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs that may be used to measure fair value:

 

·

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

·

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or

·

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

For the Company, the above standard applies to cash equivalents, earnout consideration and redeemable noncontrolling interests. The Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

 

Assets and liabilities measured at fair value on a recurring basis are summarized below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements as of December 31, 2015

(in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

Description

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents (a) 

$

 28,648 

 

$

—

 

$

—

 

$

 28,648 

Earnout consideration (b)

$

—

 

$

 

 

$

 9,673 

 

$

 9,673 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements as of December 31, 2014

(in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

Description

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents (a) 

$

 190,628 

 

$

—

 

$

—

 

$

 190,628 

Earnout consideration (b)

$

—

 

$

 

 

$

 9,155 

 

$

 9,155 

Redeemable noncontrolling interests (c)

$

—

 

$

—

 

$

 8,872 

 

$

 8,872 

 

 

(a)

Cash equivalents include funds held in money market instruments and are reported at their current carrying value which approximates fair value due to the short-term nature of these instruments and are included in cash and cash equivalents in the consolidated balance sheet.

 

(b)

The fair value of the earnout consideration, which is based on the present value of the expected future payments to be made to the sellers of the acquired businesses, was derived by analyzing the future performance of the acquired businesses using the earnout formula and performance targets specified in each purchase agreement and adjusting those amounts to reflect the ability of the acquired entities to achieve the stated targets. Given the significance of the unobservable inputs, the valuations are classified in level 3 of the fair value hierarchy. The change in earnout consideration reflects $677 of earnout accretion, partially offset by a $159 transfer to a deferred purchase payment provision.

 

(c)

Redeemable noncontrolling interests represents a put option that owners of interests in a certain subsidiary have the right, in certain circumstances, to require the Company to acquire either a portion of, or all of, the remaining ownership interests held by them. As of December 31, 2014, the Company determined the fair value of the redeemable noncontrolling interests based on unobservable inputs considering the assumptions that market participants would make in pricing the obligation. Given the significance of the unobservable inputs, the valuation was classified in level 3 of the fair value hierarchy. As of December 31, 2015, the Company believes the carrying value of the put option exceeds fair value, however, this instrument cannot be written down below the initial investment and the Company no longer considers it to be a recurring fair value measurement. See Note 22 to the Consolidated Financial Statements.

 

The Company did not have any transfers of assets and liabilities between Level 1 and Level 2 of the fair value measurement hierarchy during the quarter or year ended December 31, 2015.

 

In addition to the assets and liabilities included in the above table, certain of our assets and liabilities are to be initially measured at fair value on a non-recurring basis. This includes goodwill and other intangible assets measured at fair value for impairment assessment. For further discussion on the valuation techniques and inputs used in the fair value measurement of goodwill and other intangible assets, see Notes 2, 6 and 7 to the Consolidated Financial Statements.