POWER INTEGRATIONS INC Fair Value Disclosure
4. FAIR VALUE MEASUREMENTS:
ASC 820-10, Fair Value Measurements, clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820-10 establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices for identical assets in active markets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.
The Company’s cash equivalents and investment instruments are classified within Level 1 or Level 2 of the fair-value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The type of instrument valued based on quoted market prices in active markets primarily includes money market securities. This type of instrument is generally classified within Level 1 of the fair-value hierarchy. The types of instruments valued based on other observable inputs (Level 2 of the fair-value hierarchy) include investment-grade corporate bonds and commercial paper. Such types of investments are valued by using a multi-dimensional relational model, the inputs are primarily benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. The Company does not hold any instruments that would be classified within Level 3 of the fair-value hierarchy.
The fair value hierarchy of the Company’s cash equivalents and marketable securities at December 31, 2025 and 2024, was as follows:
Fair Value Measurement at | |||||||||
December 31, 2025 | |||||||||
| | Quoted Prices in | | ||||||
Active Markets for | Significant Other | ||||||||
Identical Assets | Observable Inputs | ||||||||
(In thousands) | Total Fair Value | (Level 1) | (Level 2) | ||||||
Commercial paper | $ | 5,555 | $ | — | $ | 5,555 | |||
Corporate securities | 189,258 | — | 189,258 | ||||||
Money market funds |
| 3,559 |
| 3,559 |
| — | |||
U.S. government securities | 999 | — | 999 | ||||||
Total | $ | 199,371 | $ | 3,559 | $ | 195,812 | |||
Fair Value Measurement at | |||||||||
December 31, 2024 | |||||||||
| | Quoted Prices in | | ||||||
Active Markets for | Significant Other | ||||||||
Identical Assets | Observable Inputs | ||||||||
(In thousands) | Total Fair Value | (Level 1) | (Level 2) | ||||||
Commercial paper | $ | 2,048 | $ | — | $ | 2,048 | |||
Corporate securities | 249,023 | — | 249,023 | ||||||
Money market funds |
| 567 |
| 567 |
| — | |||
U.S. government securities | 750 | — | 750 | ||||||
Total | $ | 252,388 | $ | 567 | $ | 251,821 | |||
The Company did not transfer any investments between Level 1 and Level 2 of the fair value hierarchy in the years ended December 31, 2025 and 2024.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 6, 2026 | Showing above |
| 2024 | Feb 7, 2025 | |
| 2023 | Feb 12, 2024 | |
| 2022 | Feb 7, 2023 | |
| 2021 | Feb 7, 2022 | |
| 2020 | Feb 5, 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.