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Fair Value of Financial Instruments
 9 Months Ended
Sep. 30, 2022
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments

16. Fair Value of Financial Instruments — The accounting standard for fair value measurements provides a framework for measuring fair value and requires certain disclosures regarding fair value measurements. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. This accounting standard established a fair value hierarchy, which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required:

 

•
Level 1 – Quoted prices in active markets for identical assets or liabilities.
•
Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•
Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

The carrying amount of the Company’s financial instruments, which principally include cash and cash equivalents, short-term investments, accounts receivable, long-term investments, accounts payable and accrued expenses, approximates fair value because of the relatively short maturity of such instruments. The carrying amount of the Company’s short-term and long-term borrowings, which are considered Level 2 liabilities, approximates fair value based upon current rates and terms available to the Company for similar debt.

The Company measures its contingent earn-out liabilities in connection with business acquisitions at fair value on a recurring basis using significant unobservable inputs classified within Level 3 of the fair value hierarchy. The Company may use various valuation techniques depending on the terms and conditions of the contingent consideration including a Monte-Carlo simulation. This simulation uses probability distribution for each significant input to produce hundreds or thousands of possible outcomes and the results are analyzed to determine probabilities of different outcomes occurring.

The following table illustrates the Company’s contingent consideration movements related to its business acquisitions:

 

 

 

Three months ended
September 30, 2022

 

 

Three months ended
September 30, 2021

 

Balance, June 30

 

$

1,367

 

 

$

2,116

 

Fair value adjustment

 

 

—

 

 

 

(493

)

Payments on existing obligations

 

 

(1,292

)

 

 

—

 

Accretion of discounted liabilities

 

 

10

 

 

 

(1

)

Foreign exchange effect

 

 

(85

)

 

 

(57

)

Balance, September 30

 

$

—

 

 

$

1,565

 

 

 

 

 

 

 

 

 

 

Nine months ended
September 30, 2022

 

 

Nine months ended
September 30, 2021

 

Balance, December 31

 

$

786

 

 

$

2,468

 

Purchase price adjustment

 

 

—

 

 

 

(955

)

Fair value adjustment

 

 

635

 

 

 

520

 

Payments on existing obligations

 

 

(1,292

)

 

 

(250

)

Accretion of discounted liabilities

 

 

28

 

 

 

(10

)

Foreign exchange effect

 

 

(157

)

 

 

(208

)

Balance, September 30

 

$

—

 

 

$

1,565

 

 

 

The contingent consideration in the amount of $786 is included in current installments of other liabilities on the condensed consolidated balance sheets as of December 31, 2021.