Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements Fair Value Measurements

v2.4.1.9
Fair Value Measurements Fair Value Measurements
12 Months Ended
Dec. 31, 2014
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
The Company records certain financial liabilities at fair value on a recurring basis. The Company determines fair values based on the price it would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability.
The prescribed fair value hierarchy and related valuation methodologies are as follows:
Level 1
Inputs are quoted prices in active markets for identical assets or liabilities.
Level 2
Inputs are quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data.
Level 3
Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

The categorization of an asset or liability within the fair value hierarchy is based on the inputs described above and does not necessarily correspond to the Company’s perceived risk of that asset or liability. Moreover, the methods used by the Company may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments and non-financial assets and liabilities could result in a different fair value measurement at the reporting date.
Assets and liabilities measured at fair value on a recurring basis:
Contingent consideration obligations: The fair value of contingent consideration obligations is estimated using a probability weighted discount model on the achievement of the conditions upon which the contingent obligation is dependent. The probability of achieving the specified conditions is assessed by applying a Monte Carlo weighted-average model. Inputs into the valuation model include a discount rate specific to the acquired entity, a measure of the estimated volatility and the risk free rate of return. There were no changes in our valuation methodology during the years ended December 31, 2014 and 2013.
Significant unobservable inputs used in the contingent consideration fair value measurements included the following at December 31:
 
 
2014
 
2013
Discount rates
 
22.5 - 64.0%
 
23.3 - 27.2%
Volatility rates
 
45.0 - 48.0%
 
58.0%
Risk free rate of return
 
0.1% - 0.2%
 
0.1%

In addition to the inputs described above, the fair value estimates consider the projected future operating and financial results for the factor upon which the respective contingent obligation is dependent. The fair value estimates are generally sensitive to changes in these projections. We develop the projected future operating and financial results based on analysis of historical results, market conditions and the expected impact of anticipated changes in our overall business and/or product strategies.
The following table discloses the liabilities measured at fair value on a recurring basis as of December 31, 2014 and 2013:
 
Fair value at December 31, 2014
 
Total
 
Level 1
 
Level 2
 
Level 3
Contingent consideration related to the acquisition of:

 
 
 
 
 
 
Active Building
$
1,566

 
$

 
$

 
$
1,566

MyBuilding
248

 

 

 
248

InstaManager
2,335

 

 

 
2,335

     VMM
1

 

 

 
1

 
$
4,150

 
$

 
$

 
$
4,150

 
Fair value at December 31, 2013
 
Total
 
Level 1
 
Level 2
 
Level 3
Contingent consideration related to the acquisition of:

 
 
 
 
 
 
Senior Living
$
113

 
$

 
$

 
$
113

Active Building
1,366

 

 

 
1,366

MyBuilding
348

 

 

 
348

 
$
1,827

 
$

 
$

 
$
1,827


There were no assets measured at fair value on a recurring basis at December 31, 2014 and 2013. There were no transfers between Level 1 and Level 2, or between Level 2 and Level 3 measurements during the years ended December 31, 2014 and 2013.
The changes in the fair value of Level 3 measurements for the reporting periods are as follows:
 
(in thousands)
Balance, January 1, 2012
$
364

Initial contingent consideration
1,614

Net gain on change in fair value
(151
)
Balance, December 31, 2013
1,827

Initial contingent consideration
2,939

Settlements through cash payments
(229
)
Net gain on change in fair value
(387
)
Balance, December 31, 2014
$
4,150


Net gains or losses on the change in the fair value of the contingent consideration obligations are included in the general and administrative line in the accompanying Consolidated Statements of Operations.
There were no assets or liabilities measured at fair value on a non-recurring basis at December 31, 2014 or 2013.