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INVESTMENTS AND FAIR VALUE MEASUREMENTS | 9 Months Ended
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Sep. 30, 2021
Fair Value Disclosures [Abstract] |
INVESTMENTS AND FAIR VALUE MEASUREMENT | INVESTMENTS AND FAIR VALUE MEASUREMENTS Accounting Standards Codification (ASC) 820 “Fair Value Measurement” (ASC 820) defines fair value, establishes a framework for measuring fair value under U.S. GAAP and enhances disclosures about fair value measurements. Fair value is defined 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. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 describes a fair value hierarchy based on the following three levels of inputs that may be used to measure fair value, of which the first two are considered observable and the last unobservable:
Level 1: |  | Quoted prices in active markets for identical assets or liabilities;
Level 2: |  | Quoted prices in active markets for similar assets or liabilities; quoted prices in markets that are not active for identical or similar assets or liabilities; and model-driven valuations whose significant inputs are observable; and
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.
The following table presents the fair value hierarchy for our financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020, respectively (in thousands):
| Total Carrying Value |  | Level 1 |  | Level 2 |  | Level 3
September 30, 2021 |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |
Funds held for clients |  |  |  |  |  |  |
Money market funds | $ | 2,409 |  |  | $ | 2,409 |  |  | $ | — |  |  | $ | — |
Available-for-sale securities | 17,451 |  |  | — |  |  | 17,451 |  |  | — |
Total | $ | 19,860 |  |  | $ | 2,409 |  |  | $ | 17,451 |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |
Contingent purchase consideration(1) | $ | 4,943 |  |  | $ | — |  |  | $ | — |  |  | $ | 4,943 |
Total | $ | 4,943 |  |  | $ | — |  |  | $ | — |  |  | $ | 4,943 |
December 31, 2020 |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |
Cash equivalents |  |  |  |  |  |  |
Money market funds | $ | 5,204 |  |  | $ | 5,204 |  |  | $ | — |  |  | $ | — |
Funds held for clients |  |  |  |  |  |  |
Money market funds | 63,999 |  |  | 63,999 |  |  | — |  |  | — |
Available-for-sale securities | 25,919 |  |  | — |  |  | 25,919 |  |  | — |
Total | $ | 95,122 |  |  | $ | 69,203 |  |  | $ | 25,919 |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |
Contingent purchase consideration(1) | $ | 3,880 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,880 |
Total | $ | 3,880 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,880 |
(1)See Note 4 — Goodwill and Intangible Assets for further discussion regarding the contingent purchase consideration. The contractual obligations and earn out provision are accounted for as a contingent liability and fair value is determined using Level 3 inputs, as estimating the fair value of these contingent liabilities require the use of significant and subjective inputs that may and are likely to change over the duration of the liabilities. The following table discloses the change in the gross contingent purchase consideration on the Company’s Condensed Consolidated Balance Sheets as of September 30, 2021 (in thousands):
December 31, 2020 | $ | 3,880 |
Contingent purchase consideration | (1,975) |
Issued for acquisitions | 3,038 |
September 30, 2021 | $ | 4,943 |
Restricted cash equivalents and investments classified as available-for-sale within funds held for clients consisted of the following (in thousands):
| Amortized Cost |  | Gross Unrealized Gains (1) |  | Gross Unrealized Losses (1) |  | Aggregate Estimated Fair Value
September 30, 2021 |  |  |  |  |  |  |
Restricted cash equivalents | $ | 1,000 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,000 |
Available-for-sale securities: |  |  |  |  |  |  |
Certificates of deposit | 5,153 |  |  | 93 |  |  | (4) |  |  | 5,242 |
Corporate debt securities | 8,085 |  |  | 160 |  |  | (5) |  |  | 8,240 |
Municipal bonds | 3,427 |  |  | 52 |  |  | (5) |  |  | 3,474 |
U.S. Government agency securities | 500 |  |  | — |  |  | (5) |  |  | 495 |
Total available-for-sale securities | 17,165 |  |  | 305 |  |  | (19) |  |  | 17,451 |
Total(2) | $ | 18,165 |  |  | $ | 305 |  |  | $ | (19) |  |  | $ | 18,451 |
December 31, 2020 |  |  |  |  |  |  |
Restricted cash equivalents | $ | 1,258 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,258 |
Available-for-sale securities: |  |  |  |  |  |  |
Certificates of deposit | 7,370 |  |  | 204 |  |  | — |  |  | 7,574 |
Corporate debt securities | 8,914 |  |  | 295 |  |  | (1) |  |  | 9,208 |
Municipal bonds | 7,276 |  |  | 103 |  |  | (1) |  |  | 7,378 |
U.S. Government agency securities | 500 |  |  | 1 |  |  | — |  |  | 501 |
Total available-for-sale securities | 24,060 |  |  | 603 |  |  | (2) |  |  | 24,661 |
Total(2) | $ | 25,318 |  |  | $ | 603 |  |  | $ | (2) |  |  | $ | 25,919 |
(1)Unrealized gains and losses on available-for-sale securities are included as a component of comprehensive income (loss). As of September 30, 2021 and December 31, 2020, there were 42 and 69 securities, respectively, in an unrealized gain position and there were 9 and 2 securities in an unrealized loss position, respectively. As of September 30, 2021, these unrealized losses were less than $6 individually and $19 in the aggregate. As of December 31, 2020, these unrealized losses were less than $2 individually and $2 in the aggregate. These securities have not been in a continuous unrealized gain or loss position for more than 12 months. We do not intend to sell these investments and we do not expect to sell these investments before recovery of their amortized cost basis, which may be at maturity. We review our investments to identify and evaluate investments that indicate possible other-than-temporary impairment. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. (2)At September 30, 2021 and December 31, 2020, none of these securities were classified as cash and cash equivalents on the accompanying Condensed Consolidated Balance Sheets. Funds held for clients represent assets that the Company has classified as restricted for use solely for the purposes of satisfying the obligations to remit funds relating to the Company’s payroll and payroll tax filing services, which are classified as client funds obligations on our Condensed Consolidated Balance Sheets. Funds held for clients have been invested in the following categories (in thousands):
| September 30, 2021 |  | December 31, 2020
Restricted cash and cash equivalents held to satisfy client funds obligations | $ | 157,303 |  |  | $ | 296,408 |
Restricted short-term marketable securities held to satisfy client funds obligations | 3,297 |  |  | 4,249 |
Restricted long-term marketable securities held to satisfy client funds obligations | 14,154 |  |  | 20,412 |
Total funds held for clients | $ | 174,754 |  |  | $ | 321,069 |
Expected maturities of available-for-sale securities as of September 30, 2021 are as follows (in thousands):
One year or less | $ | 3,297 |
After one year through five years | 14,154 |
| $ | 17,451 |

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258 + Details
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