Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements

v2.3.0.15
Fair Value Measurements
 12 Months Ended
Sep. 30, 2011
Fair Value Measurements  
Fair Value Measurements

10. Fair Value Measurements

 

The Company is required to disclose the fair value of all assets and liabilities subject to fair value measurement and the nature of the valuation techniques, including their classification within the fair value hierarchy, utilized by the Company in performing these measurements.

 

The FASB provides a fair value framework which requires the categorization of assets and liabilities into three levels based upon the assumptions (or inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:

 

Level 1:

Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

 

Level 2:

Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

 

 

Level 3:

Unobservable inputs that reflect the reporting entity’s own assumptions.

 

The Company’s financial assets subject to fair value measurements and the necessary disclosures are as follows (in thousands):

 

 

 

Fair Value as of
September 30,

 

Fair Value Measurements as of September 30, 2011 Using Fair
Value Hierarchy

 

Description

 

2011

 

Level 1

 

Level 2

 

Level 3

 

Current portion of acquisition-related contingent consideration

 

$

(1,840

)

$

—

 

$

—

 

$

(1,840

)

Acquisition related contingent consideration, net of current portion

 

(388

)

—

 

—

 

(388

)

Current portion of deferred compensation plan liabilities

 

(1,503

)

—

 

(1,503

)

—

 

Deferred compensation plan liabilities, net of current portion

 

(8,883

)

—

 

(8,883

)

—

 

 

The current portion of the deferred compensation plan liabilities is included on the balance sheet under “Accrued liabilities.”

 

The Company’s deferred compensation plan liabilities are valued using a market approach, utilizing the value of the underlying investments to identify the fair value. Changes in deferred compensation plan liabilities are recorded in the income statement within “Interest and other income, net.”

 

The Company’s only acquisition-related contingent consideration liability was incurred with the acquisition of DeltaWare Systems, Inc. (“DeltaWare”) in February 2010. The fair value of the acquisition-related contingent consideration liability was based on a probability-weighted approach derived from management’s own estimates of profitability and sales targets. During the current year, management’s estimates of DeltaWare’s future profitability have been revised, with the result that an additional charge has been recognized in the statement of operations. Foreign currency translation adjustments were recorded as a component of other comprehensive income.

 

The effect on the financial statements is summarized below (in thousands):

 

Balance at September 30, 2010

 

$

3,061

 

Additional estimated consideration

 

150

 

Payment of consideration

 

(1,021

)

Foreign currency translation

 

38

 

Balance at September 30, 2011

 

$

2,228