EFTA01378072.pdf

active Significant markets for other Significant identical observable unobservable Total assets inputs inputs fair value (Level 1) (Level 2) (Level 3) measurements (In thousands) Assets: Cash equivalents: Money market funds $ 233376 $ — $ — $ 233,376 Long-term investments: Marketable equity security 9,594 — — 9,594 Total $ 242.970 $ - $ - $ 242,970 Liabilities: Contingent consideration arrangements $ — $ — $ (28.573) $ (28,573) The following table presents the changes in the Company's financial instruments that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3): Nine months ended September 30, 2014 2015 Contingent Contingent consideration consideration arrangements arrangements (In thousands) Balance at January 1 (43,625) $ (20.615) Total net (losses) gains: Included in earnings: Fair value adjustments 13.581 11.479 Foreign currency exchange gains 626 Included in other comprehensive loss 2.054 1.539 Fair value at date of acquisition (27.112) Settlements 7.373 5.510 Balance at September 30 (20,617) $ (28,573) Contingent consideration arrangements As of September 30, 2015. there are five contingent consideration arrangements related to business acquisitions. The maximum contingent payments related to these arrangements is $170.3 million and the fair value of these arrangements at September 30, 2015 is $28.6 million. The contingent consideration arrangements are generally based upon earnings performance endear operating metrics such as monthly active users. The Company determines the fair value of the contingent consideration arrangements by using a probability-weighted analysis to determine the amount of the gross liability, and, if the arrangement is long-term in nature. applying a discount rate that captures the risks associated with the obligation. The number of scenarios in the probability-weighted analyses can vary: generally, more F-11 Table.91.C.ellients scenarios are prepared for longer duration and more complex arrangements. The contingent consideration arrangements' fair values at September 30. 2015 reflect a discount rate of 12%. The fair values of the contingent consideration arrangements are sensitive to changes in the forecasts of earnings and'or the relevant operating metrics and changes in discount rates. The Company remeasures the fair value of the contingent consideration arrangements each reporting period. and changes are recognized in "General and administrative expense" in the accompanying combined statement of operations. The contingent consideration arrangement liability at September 30, 2015 is non-current and included in "Other long-term liabilities" in the accompanying combined balance sheet. Assets measured at fair value on a nonrecurring basis The Company's non-financial assets. such as goodwill, intangible assets and property and equipment. as well as cost method investments, are adjusted to fair value only when an impairment charge is recognized. Such fair value measurements are based predominantly on Level 3 inputs. Cost method investments At both December 31, 2014 and September 30, 2015, the carrying value of the Company's investments accounted for under the cost method totaled $55.6 million: these investments are included in long-term investments' in the accompanying combined balance sheet. The Company evaluates each cost method investment for impairment on a quarterly basis and recognizes an impairment loss if a decline in value is determined to be other-than-temporary. If the Company has not identified events or changes in circumstances that may have a significant adverse effect on the fair value of a cost method investment. then the fair value of such cost method investment is not estimated, as it is impracticable to do so. Long-term marketable equity security The cost basis of the Company's long-term marketable equity security at December 31, 2014 and September 30. 2015 is $8.7 million, with a gross unrealized hop: sec.gov An:lives daW1575189110010474691500643112226458^-13.huniI 9r-2013911:17 AM) CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0075232 CONFIDENTIAL SONY GM_00221416 EFTA01378072