Fair Value Measurements and Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2023

Fair Value Measurements and Fair Value of Financial Instruments

The authoritative guidance on the fair value hierarchy for disclosure of fair value measurements is as follows:

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.

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 fair value of Level 1 securities is determined using quoted prices in active markets for identical assets. Level 1 securities consist of highly liquid money market funds. Financial assets and liabilities are considered Level 2 when their fair values are determined using inputs that are observable in the market or can be derived principally from or corroborated by observable market data such as pricing for similar securities, recently executed transactions, cash flow models with yield curves, and benchmark securities. In addition, Level 2 financial instruments are valued using comparisons to like-kind financial instruments and models that use readily observable market data as their basis. U.S. government and agency securities, commercial paper, and corporate bonds are valued primarily using market prices of comparable securities, bid/ask quotes, interest rate yields and prepayment spreads and are included in Level 2.

The following is a summary of the Company’s cash equivalents and short-term investments:


	March 31, 2023
	Amortized Cost Basis		Unrealized Gains		Unrealized Losses		Estimated Fair Value
	(In thousands)
Level 1:
Money market funds	$	10,984	$	—	$	—	$	10,984
Level 2:
Commercial paper	72,594		1		(66)		72,529
U.S. government and agency securities	71,949		6		(300)		71,655
Corporate bonds	2,059		—		(7)		2,052
Total cash equivalents and short-term investments	157,586		7		(373)		157,220
Less: cash equivalents	(60,485)		(6)		4		(60,487)
Total short-term investments	$	97,101	$	1	$	(369)	$	96,733


	December 31, 2022
	Amortized Cost Basis		Unrealized Gains		Unrealized Losses		Estimated Fair Value
	(In thousands)
Level 1:
Money market funds	$	10,235	$	—	$	—	$	10,235
Level 2:
Commercial paper	102,722		—		(246)		102,476
U.S. government and agency securities	59,487		—		(824)		58,663
Corporate bonds	2,059		—		(35)		2,024

Total cash equivalents and short-term investments	174,503		—		(1,105)		173,398
Less: cash equivalents	(56,256)		—		16		(56,240)
Total short-term investments	$	118,247	$	—	$	(1,089)	$	117,158

As of March 31, 2023, all marketable securities have a remaining maturity of less than one year. The aggregate fair value of debt securities in an unrealized loss position at March 31, 2023 and December 31, 2022 was $105.9 million and $155.5 million, respectively, which are highly liquid funds with high credit ratings that have final maturity of less than two years from date of purchase. The Company has not recorded an allowance for credit losses as of March 31, 2023 and December 31, 2022 related to these securities. There were no individual securities that were in a significant unrealized loss position as of March 31, 2023 and December 31, 2022. The Company regularly reviews the securities in an unrealized loss position and evaluates the current expected credit loss by considering factors such as historical experience, market data, issuer-specific factors, and current economic conditions. The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases. The Company has not recorded any impairment charges on available-for-sale securities.

- 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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