PIXELWORKS, INCPXLW

PIXELWORKS, INC Fair Value Disclosure

10-KFiled Mar 13, 20193 min read
MARKETABLE SECURITIES AND FAIR VALUE MEASUREMENTS
Marketable Securities
As of December 31, 2018 and December 31, 2017, all of our marketable securities are classified as available-for-sale and consist of the following:
 
Cost
 
Unrealized Gain (Loss)
 
Fair Value
Short-term marketable securities:
 
 
 
 
 
As of December 31, 2018:
 
 
 
 
 
Corporate debt securities
$
3,238

 
$
(2
)
 
$
3,236

U.S. government treasury bills
1,841

 
—

 
1,841

Commercial paper
992

 
—

 
992

 
$
6,071

 
$
(2
)
 
$
6,069

 
 
 
 
 
 
As of December 31, 2017:
 
 
 
 
 
Corporate debt securities
$
—

 
$
—

 
$
—

U.S. government treasury bills
—

 
—

 
—

Commercial paper
—

 
—

 
—

 
$
—

 
$
—

 
$
—



Unrealized holding gains and losses are recorded in accumulated other comprehensive income, a component of shareholders’ equity, in the condensed consolidated balance sheets.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Three levels of inputs may be used to measure fair value:
Level 1:
Valuations based on quoted prices in active markets for identical assets and liabilities.
Level 2:
Valuations based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3:
Valuations based on unobservable inputs in which there is little or no market data available, which require the reporting entity to develop its own assumptions.
The following table presents information about our assets and liabilities measured at fair value on a recurring basis in the consolidated balance sheets as of December 31, 2018 and 2017: 
 
Level 1
 
Level 2
 
Level 3
 
Total
As of December 31, 2018:
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
13,388

 
$
—

 
$
—

 
$
13,388

Commercial paper
—

 
250

 
—

 
250

Corporate debt securities
—

 
249

 
—

 
249

Short-term marketable securities:
 
 
 
 
 
 
 
U.S. government treasury bills
1,841

 
—

 
—

 
1,841

Corporate debt securities
—

 
3,236

 
—

 
3,236

Commercial paper
—

 
992

 
—

 
992

 
 
 
 
 
 
 
 
As of December 31, 2017:
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Money market funds
23,402

 
—

 
—

 
23,402

Liabilities:
 
 
 
 
 
 
 
Convertible debt - including conversion feature
—

 
5,300

 
—

 
5,300

Conversion feature - convertible debt
—

 
2,350

 
—

 
2,350


We primarily use the market approach to determine the fair value of our financial instruments. The fair value of our current assets and liabilities, including accounts receivable and accounts payable approximates the carrying value due to the short-term nature of these balances. We have currently chosen not to elect the fair value option for any items that are not already required to be measured at fair value in accordance with U.S. GAAP.
The fair value of the convertible debt conversion feature was calculated using the Tsiveriotis and Fernandes Convertible Debt Model. Three primary assumptions used in the calculations were: volatility of 60%, credit spread of 13.13% and risk free rate of 1.87%. The embedded conversion feature is measured at fair value on a recurring basis and included with convertible debt on our condensed consolidated balance sheet. Convertible debt was recorded at fair value in our condensed consolidated balance sheet on the date of the Acquisition, however fair value adjustments were not required after the Acquisition date.
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Historical Timeline

Fiscal YearFiled
2018Mar 13, 2019Showing above
2017Mar 14, 2018
2016Mar 8, 2017

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.

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