CareCloud, Inc. Fair Value Disclosure
19. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value measurements are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market participant assumptions in the absence of observable market information. We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The fair values of assets and liabilities required to be measured at fair value are categorized based upon the level of judgement associated with the inputs used to measure their value in one of the following three categories:
Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities. We held no Level 1 financial instruments at December 31, 2024 or 2023.
Level 2: Quoted prices for similar instruments in active markets with inputs that are observable, either directly or indirectly. Our Level 2 financial instruments include notes payable which are carried at cost and approximate fair value since the interest rates being charged approximate market rates.
Level 3: Unobservable inputs are significant to the fair value of the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. Our Level 3 instruments include the fair value of contingent consideration related to completed acquisitions. There was no contingent consideration recorded at December 31, 2024 and 2023.
The following table provides the assets and liabilities carried at fair value measured on a non-recurring basis as of December 31, 2024 and 2023. Refer to Note 2 - Basis of Presentation and Significant Accounting Policies, for a description of the valuation techniques used to determine the fair value of the assets measured on a non-recurring basis in the table below:
| Fair Value Measurements at December 31, 2024 | Expense for the year ended | |||||||||||||||||||
| Carrying Value | Level 1 | Level 2 | Level 3 | December 31, 2024 | ||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
| Goodwill - Healthcare IT | $ | 19,186 | $ | $ | $ | 19,186 | $ | |||||||||||||
| Fair Value Measurements at December 31, 2023 | Expense for the year ended | |||||||||||||||||||
| Carrying Value | Level 1 | Level 2 | Level 3 | December 31, 2023 | ||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
| Goodwill - Healthcare IT | $ | 19,186 | $ | $ | $ | 19,186 | $ | 42,000 | ||||||||||||
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About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.