3. Fair Value Measurement

The balances of our financial assets that were measured at fair value on a recurring basis as of December 31, 2023 and 2022 were not material. The following tables summarize the balances of our financial liabilities (in thousands) that were measured at fair value on a recurring basis, and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value:

 

 

December 31, 2023

 

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts(1)

 

$

 

 

$

690

 

 

$

 

 

$

690

 

Total liabilities

 

$

 

 

$

690

 

 

$

 

 

$

690

 

 

 

 

December 31, 2022

 

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Deferred cash consideration in connection with a business acquisition—SCUF(2)

 

$

 

 

$

 

 

$

954

 

 

$

954

 

Foreign currency forward contracts(1)

 

 

 

 

 

484

 

 

 

 

 

 

484

 

Total liabilities

 

$

 

 

$

484

 

 

$

954

 

 

$

1,438

 

 

(1)
The fair values of the forward contracts were based on similar exchange traded derivatives and the related asset or liability is included within Level 2 of the fair value hierarchy.
(2)
In December 2019, one of our subsidiaries entered into an Agreement and Plan of Merger with Scuf Holdings, Inc. and its subsidiaries (collectively, “SCUF”) and acquired 100% of their equity interests (the “SCUF Acquisition”). The fair value of the SCUF contingent consideration was determined based on the estimates of acquired tax benefits owed to SCUF’s sellers according to the merger agreement, and these estimates represent a level 3 fair value measurement. The $1.0 million liability as of December 31, 2022 was finalized and this amount was paid in 2023.

Historical Timeline

Fiscal YearFiled
2023Feb 27, 2024Showing above
2022Feb 27, 2023
2021Mar 1, 2022
2020Mar 11, 2021

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.