Organization and Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Mar. 30, 2014 |
Accounting Policies [Abstract] | ' |
Business | ' |
Business |
InvenSense, Inc. (“the Company”) was incorporated in California in June 2003 and reincorporated in Delaware in January 2004. The Company designs, develops, markets and sells Micro-Electro-Mechanical Systems (“MEMS”) sensors, such as accelerometers, gyroscopes and microphones for consumer electronics, and is dedicated to bringing the best-in-class size, performance and cost solutions to market. Targeting applications in smartphones and tablets, console and portable video gaming devices, digital still and video cameras, smart TVs (including digital set-top boxes, televisions and multi-media HDDs), navigation devices, toys, and health and fitness accessories, the Company delivers leading solutions based on its advanced multi-axis technology. |
Certain Significant Business Risks and Uncertainties | ' |
Certain Significant Business Risks and Uncertainties |
The Company participates in the high-technology industry and believes that adverse changes in any of the following areas could have a material effect on the Company’s future financial position, results of operations, or cash flows: reliance on a limited number of primary customers to support the Company’s revenue generating activities; advances and trends in new technologies and industry standards; market acceptance of the Company’s products; development of sales channels; strategic relationships, including key component suppliers; litigation or claims against the Company based on intellectual property, patent, product, regulatory, or other factors; and the Company’s ability to attract and retain employees necessary to support its growth. |
Basis of Consolidation | ' |
Basis of Consolidation |
The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles, or GAAP, and include our accounts and the accounts of our wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The functional currency of each of the Company’s subsidiaries is the U.S. dollar. Foreign currency gains or losses are recorded as other income (expense), net, in the consolidated statements of income. During the fiscal year ended March 30, 2014, foreign currency losses were $260,000. During the fiscal year ended March 31, 2013, foreign currency losses were $51,000. During the fiscal year ended April 1, 2012 foreign currency losses were $43,000. |
Fiscal Year | ' |
Fiscal Year |
The Company’s fiscal year is a 52 or 53 week period ending on the Sunday closest to March 31. The Company’s three most recent fiscal years ended on March 30, 2014 (“fiscal year 2014”), March 31, 2013 (“fiscal year 2013”) and April 1, 2012 (“fiscal year 2012”) were each comprised of 52 weeks. |
Use of Estimates | ' |
Use of Estimates |
The preparation of the Company’s Consolidated Financial Statements and related Notes in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and related Notes and the reported amounts of income and expenses during the reporting period. Significant estimates included in the Consolidated Financial Statements and related Notes include income taxes, inventory valuation, stock-based compensation, loss contingencies, warranty reserves, valuation of acquired assets, and valuation of convertible senior notes, including the related convertible notes hedges and warrants. These estimates are based upon information available as of the date of the consolidated financial statements, and actual results could differ from those estimates. |
Cash Equivalents | ' |
Cash Equivalents |
The Company considers all highly liquid instruments acquired with a remaining maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents are stated at cost, which approximates their fair value. |
Available-for-Sale Investments | ' |
Available-for-Sale Investments |
Securities with remaining maturities at the time of purchase of greater than three months are considered available for sale investments. If the securities have remaining maturities of less than twelve months from the balance sheet date they are classified as short-term investments in the Company’s consolidated balance sheets; if their maturities exceed twelve months beyond the balance sheet date, they are classified as long-term investments in the Company’s consolidated balance sheets. Available-for-sale securities are carried at fair value with temporary unrealized gains and losses, net of taxes, reported within “accumulated other comprehensive income” in the Company’s consolidated financial statements. |
Available-for-sale investments are considered to be impaired when a decline in fair value is judged to be other than temporary. The Company considers available quantitative and qualitative evidence in evaluating potential impairment of its investments on a quarterly basis. If the cost of an investment exceeds its fair value, management evaluates, among other factors, general market conditions, the duration and extent to which the fair value is less than cost, and the Company’s intent and ability to hold the investment. Once a decline in fair value is determined to be other than temporary, an impairment charge is recorded and a new cost basis in the investment is established. During fiscal 2014, fiscal 2013 and fiscal 2012, the Company did not identify any other than temporary impairments. |
Accounts Receivable | ' |
Accounts Receivable |
Trade accounts receivable are recorded at the invoiced amount, net of allowances for doubtful accounts and sales returns and allowances. The allowance for doubtful accounts is based on the Company’s assessment of the collectability of customer accounts. The Company periodically reviews the need for an allowance by considering factors such as historical experience, credit quality, the age of the accounts receivable balances and current economic conditions that may affect a customer’s ability to pay. As a result of the Company’s favorable collection experience and customer concentration, no allowance for doubtful accounts was necessary at March 2014 or March 2013. The reserve for sales returns and allowances is based on specific criteria including agreements to provide rebates and other factors known at the time, as well as estimates of the amount of goods shipped that will be returned. To determine the adequacy of the reserve for sales returns and allowances, the Company analyzes historical experience of actual returns as well as current product return information. During fiscal 2014, fiscal 2013 and fiscal 2012, the Company incurred charges related to its reserve for sales returns and allowances of $134,000, $84,000 and $132,000, respectively. At March 2014 and March 2013, the balances for the reserve for sales returns and allowances were $91,000, and $21,000 , respectively. |
Concentration of Credit Risk | ' |
Concentration of Credit Risk |
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents, investments, advances to vendors, accounts receivable and the Note Hedge (see Note 5). The Company limits exposure to credit loss by placing cash, cash equivalents and investments with major financial institutions within the United States that management assesses to be of high credit quality. The Company periodically reviews the credit worthiness of its customers and generally does not require collateral or other security to support accounts receivable. The Company has not experienced any losses on accounts receivables or on deposits of cash and cash equivalents for fiscal 2014, fiscal 2013 or fiscal 2012. |
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At March 30, 2014, three customers accounted for 28%, 19% and 19% of total accounts receivable. At March 2013, four customers accounted for 17%, 12%, 10% and 10% of total accounts receivable. No other customers accounted for more than 10% of total accounts receivable at March 2014 or March 2013. |
For fiscal 2014 one customer accounted for 35% of total net revenue. For fiscal 2013 three customers accounted for 24%, 18% and 11% of total net revenue. For fiscal 2012 three customers accounted for 31%, 15% and 12% of total net revenue. No other customers accounted for more than 10% of total net revenue for fiscal 2014, fiscal 2013 or fiscal 2012. |
Inventories | ' |
Inventories |
Inventories are stated at the lower of cost or market on a first-in, first-out basis. Inventories include finished good parts that may be specialized in nature and subject to obsolescence. The Company periodically reviews the quantities and carrying values of inventories to assess whether the inventories are recoverable. The costs associated with write-downs of inventory for excess quantity and technological obsolescence are charged to cost of revenue as incurred. Actual demand may materially differ from the Company’s projected demand, and this difference could have a material impact on the Company’s gross margin and inventory balances based on additional provisions for excess or obsolete inventory or a benefit from sales of inventory previously written down. Write-down amounts charged (credited) to cost of revenues for fiscal years 2013 and 2012 were $(3.0) million and $2.2 million, respectively. Write-down amounts charged (credited) to cost of revenues for fiscal year 2014 were insignificant. |
Property and Equipment, net | ' |
Property and Equipment, net |
Property and equipment, net are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows: production equipment and furniture and fixtures—four to five years, lab equipment, computer equipment and software—three to five years, and leasehold improvements—over the shorter of the estimated useful life or the remaining lease term. |
Business Combinations | ' |
Business Combinations |
The purchase price of an acquisition is allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. To the extent the purchase price exceeds the fair value of the net identifiable tangible and intangible assets acquired and liabilities assumed, such excess is allocated to goodwill. The Company determines the estimated fair values after review and consideration of relevant information, including discounted cash flows, quoted market prices and estimates made by management. The Company adjusts the preliminary purchase price allocation, as necessary, during the measurement period of up to one year after the acquisition closing date as it obtains more information as to facts and circumstances existing at the acquisition date impacting asset valuations and liabilities assumed. Acquisition-related costs are recognized separately from the acquisition and are expensed as incurred. |
Goodwill | ' |
Goodwill |
Goodwill represents the excess of the purchase price of an acquired business over the fair value of the underlying net tangible and intangible assets. Goodwill is evaluated for impairment annually, and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. Triggering events that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or business climate that could affect the value of goodwill or a significant decrease in expected cash flows. |
Intangible Assets | ' |
Intangible Assets |
Intangible assets consist of developed technology and customer relationships, and in-process research and development resulting from the Company’s acquisition of MEMS microphone business of Analog Devices, Inc. (“ADI”) in the third quarter of fiscal 2014. Acquired intangible assets that are subject to amortization are developed technology and customer relationships and are recorded at cost, net of accumulated amortization. Intangible assets are amortized on a straight-line basis over their estimated useful lives. In-process research and development capitalized during business combination is amortized only after successful completion of project, over the expected useful life. |
Impairment of Long Lived Assets | ' |
Impairment of Long Lived Assets |
The Company regularly reviews the carrying amount of its long-lived assets, including property and equipment and intangible assets, as well as the useful lives, to determine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives. An impairment loss would be recognized when the sum of the expected future undiscounted net cash flows is less than the carrying amount of the asset. Should impairment exist, the impairment loss would be measured based on the excess of the carrying amount of the asset over the asset’s fair value. |
Warranty | ' |
Warranty |
The Company’s warranty agreements are contract and component specific and can be up to three years for selected components. The Company’s accrual for anticipated warranty costs has declined primarily due to a decline in the historical volume of product returned under the warranty program. The accrual also includes management’s judgment regarding anticipated rates of warranty claims and associated repair costs. The following table summarizes the activity related to the product warranty liability during fiscal 2014, fiscal 2013 and fiscal 2012: |
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| | Fiscal 2014 | | | Fiscal 2013 | | | Fiscal 2012 | |
| | (in thousands) | |
Beginning balance | | $ | 123 | | | $ | 361 | | | $ | 697 | |
Provision for warranty for the year | | | 59 | | | | 60 | | | | 301 | |
Accruals related to changes in estimate | | | (71 | ) | | | (262 | ) | | | (547 | ) |
Less: actual warranty costs | | | (31 | ) | | | (36 | ) | | | (90 | ) |
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Ending balance | | $ | 80 | | | $ | 123 | | | $ | 361 | |
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Revenue Recognition | ' |
Revenue Recognition |
Revenue from the sale of the Company’s products is recognized when all of the following four criteria are met: (1) persuasive evidence of an arrangement exists; (2) the product has been delivered; (3) the price is fixed or determinable; and (4) collection is reasonably assured. Delivery takes place after the transfer of title which historically has occurred upon shipment of the product unless otherwise stated in the customer agreement. |
For direct customers (i.e., other than distributors), the Company recognizes revenue when title to the product is transferred to the customer, which occurs upon shipment or delivery, depending upon the terms of the customer order. |
The Company primarily enters into sales transactions with distributors in which the distributor is purchasing product for an identified end-customer. For these transactions, the Company recognizes net revenue upon either shipment or delivery to the distributor, depending upon when title transfers under the terms of the order. Pursuant to the terms and conditions contained in the agreement with its distributors, all sales to distributors purchased for an identified end-customer are non-refundable, do not have rights to return product purchases except under the Company’s standard warranty terms, and do not include any price concessions or price protection. |
Research and Development | ' |
Research and Development |
Research and development activities are expensed as incurred. |
Stock-Based Compensation | ' |
Stock-Based Compensation |
The Company measures the cost of employee services received in exchange for equity incentive awards, including stock options, based on the grant date fair value of the award. The fair value is estimated using the Black-Scholes option pricing model. The Black-Scholes model requires us to estimate certain key assumptions including future stock price volatility, expected term of the options, risk free rates, and dividend yields. Certain of our stock-based awards contained a market-based condition for vesting; these awards were valued using a Monte Carlo simulation analysis to model and value multiple possible outcomes. The Company also estimates potential forfeiture of equity incentive awards granted and adjust compensation expense accordingly. The estimate of forfeitures is adjusted over the estimated term to the extent that the actual forfeiture rate or expected forfeiture rate is expected to differ from these estimates. The resulting cost is recognized over the period during which the employee is required to provide services in exchange for the award, which is usually the vesting period. The Company recognizes compensation expense over the vesting period using the straight-line method and classify these amounts in the statements of income based on the department to which the related employee is assigned. See Note 6 “Stockholders’ Equity” for a description of our stock-based employee compensation plans and the assumptions the Company uses to calculate the fair value of stock-based employee compensation. |
Income Taxes | ' |
Income Taxes |
The Company accounts for income taxes in accordance with ASC 740-10 “Income Taxes,” which requires the asset and liability approach and the recognition of taxes payable or receivable for the current year and deferred tax liabilities and assets for future tax consequences of events that have been recognized in the Company’s Consolidated Financial Statements and related Notes or tax returns. The measurement of current and deferred tax liabilities and assets are based on provisions of the enacted laws; the effects of future changes in tax laws or rates are not anticipated. Deferred tax assets are reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized. Valuation allowances are established when necessary to reduce deferred tax assets to the amount that is more likely than not to be realized. |
ASC 740-10 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740-10 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits in income tax provision. |
Net Income Per Share | ' |
Net Income Per Share |
Basic and diluted net income per common share are presented in conformity with the two-class method required for participating securities for the period prior to their conversion upon the Company’s initial public offering (“IPO”) in November 2011, when all preferred shares were converted to common stock. |
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Prior to the IPO, holders of the Company’s preferred stock were entitled to receive noncumulative dividends prior to the payment of dividends on shares of the Company’s common stock. In the event a dividend were paid on common stock, the preferred stockholders would have also been entitled to a proportionate share of any such dividend as if they were holders of common stock (on an as-if converted basis). |
Under the two-class method, net income allocable to common stockholders is determined by allocating undistributed earnings, calculated as net income less current period non-cumulative dividends allocable to the preferred stockholders for the period prior to their conversion upon the Company’s IPO. In computing diluted net income attributed to common stockholders, undistributed earnings are reallocated to reflect the potential impact of dilutive securities. Basic net income per common share is computed by dividing the net income allocable to common stockholders by the weighted average number of common shares outstanding during the period, which excludes dilutive unvested restricted stock. |
Diluted net income per share allocable to common stockholders is computed by dividing the net income allocable to common stockholders by the weighted average number of common shares outstanding, including unvested restricted stock, certain preferred stock warrants, (which were converted into common stock warrants at the completion of the Company’s IPO), and potential dilutive common shares assuming the dilutive effect of outstanding stock options and restricted stock units using the treasury stock method. |
The following table presents the calculation of basic and diluted net income per share: |
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| | Fiscal 2014 | | | Fiscal 2013 | | | Fiscal 2012 | |
| (in thousands, except per share data) | |
Net income allocable to common stockholders: | | | | | | | | | | | | |
Numerator: | | | | | | | | | | | | |
Basic: | | | | | | | | | | | | |
Net income | | $ | 6,119 | | | $ | 51,705 | | | $ | 36,947 | |
Non-cumulative dividends on convertible preferred stock | | | — | | | | — | | | | (1,915 | ) |
Undistributed earnings allocable to convertible preferred stockholders | | | — | | | | — | | | | (18,703 | ) |
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Net income allocable to common stockholders—basic | | $ | 6,119 | | | $ | 51,705 | | | $ | 16,329 | |
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Diluted: | | | | | | | | | | | | |
Net income | | $ | 6,119 | | | $ | 51,705 | | | $ | 36,947 | |
Non-cumulative dividends on convertible preferred stock | | | — | | | | — | | | | (1,967 | ) |
Undistributed earnings allocable to convertible preferred stockholders | | | — | | | | — | | | | (17,600 | ) |
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Net income allocable to common stockholders—diluted | | $ | 6,119 | | | $ | 51,705 | | | $ | 17,380 | |
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Denominator: | | | | | | | | | | | | |
Basic shares: | | | | | | | | | | | | |
Weighted average shares used in computing basic net income per common share | | | 86,520 | | | | 82,738 | | | | 41,614 | |
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Diluted shares: | | | | | | | | | | | | |
Weighted average shares used in computing basic net income per common share | | | 86,520 | | | | 82,738 | | | | 41,614 | |
Effect of potentially dilutive securities: | | | | | | | | | | | | |
Stock options and unvested restricted stock | | | 3,367 | | | | 4,445 | | | | 5,229 | |
Common stock warrants | | | 41 | | | | 176 | | | | 168 | |
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Weighted average shares used in computing diluted net income per common share | | | 89,928 | | | | 87,359 | | | | 47,011 | |
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Net income per common share: | | | | | | | | | | | | |
Basic | | $ | 0.07 | | | $ | 0.62 | | | $ | 0.39 | |
Diluted | | $ | 0.07 | | | $ | 0.59 | | | $ | 0.37 | |
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The following summarizes the potentially dilutive securities outstanding at the end of each period that were excluded from the computation of diluted net income per common share for the periods presented as their effect would have been antidilutive: |
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| | Fiscal 2014 | | | Fiscal 2013 | | | Fiscal 2012 | |
| | (in thousands) | |
Employee stock options | | | 1,992 | | | | 4,498 | | | | 3,365 | |
Unvested restricted stock units | | | 1,338 | | | | 110 | | | | 2 | |
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Total antidilutive securities | | | 3,330 | | | | 4,608 | | | | 3,367 | |
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Comprehensive Income | ' |
Comprehensive Income |
Comprehensive income includes certain changes in equity that are excluded from net income. Specifically, unrealized gains and losses are included in accumulated other comprehensive income. During fiscal 2014, fiscal 2013 and fiscal 2012, comprehensive income included a combination of the current period net income and unrealized gain (loss) on available for sale investments. |
Segment Information | ' |
Segment Information |
The Company operates in one operating segment by designing, developing, manufacturing and marketing linear and mixed-signal integrated circuits. The Chief Executive Officer has been identified as the Chief Operating Decision Maker as defined by Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 280 “Segment Reporting”. Enterprise-wide information is provided in accordance with ASC 280. Geographical revenue information is based on the location of our customers’ head offices. Property and equipment information is based on the physical location of the assets at the end of each fiscal period. |
Property and equipment by country were as follows: |
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Country | | March 2014 | | | March 2013 | | | | | |
| | (in thousands) | | | | | |
Taiwan | | $ | 16,902 | | | $ | 6,190 | | | | | |
United States | | | 7,605 | | | | 2,333 | | | | | |
Other | | | 732 | | | | 127 | | | | | |
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| | $ | 25,239 | | | $ | 8,650 | | | | | |
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Net revenues from unaffiliated customers by country were as follows: |
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Region | | Fiscal 2014 | | | Fiscal 2013 | | | Fiscal 2012 | |
| | (in thousands) | |
Korea | | $ | 112,880 | | | $ | 69,874 | | | $ | 39,827 | |
Japan | | | 45,493 | | | | 65,663 | | | | 54,754 | |
China | | | 43,796 | | | | 14,742 | | | | 11,855 | |
Taiwan | | | 18,737 | | | | 39,203 | | | | 34,040 | |
United States | | | 24,681 | | | | 16,667 | | | | 11,916 | |
Rest of world | | | 6,946 | | | | 2,485 | | | | 575 | |
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| | $ | 252,533 | | | $ | 208,634 | | | $ | 152,967 | |
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Recent Accounting Pronouncements | ' |
Recent Accounting Pronouncements |
In July 2013, the FASB issued ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit when a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” that will require the presentation of certain unrecognized tax benefits as reductions to deferred tax assets rather than as liabilities in our Consolidated Balance Sheets when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. This standard is effective for fiscal years beginning on or after December 15, 2013, and for interim periods within those fiscal years which will be the Company’s fiscal year 2015. The Company is currently evaluating the impact of this new standard on its Consolidated Financial Statements. |
In February 2013, the FASB issued ASU No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” which adds new disclosure requirements for items reclassified out of accumulated other comprehensive income. ASU No. 2011-02 became effective for fiscal years, and interim periods within those years, beginning after December 15, 2012, which was the Company’s fiscal interim period ended June 30, 2013 of fiscal year 2014, and the adoption did not impact the Company’s financial condition or results of operations. |
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 provides guidance that companies will recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the payment to which a company expects to be entitled in exchange for those goods or services. InvenSense will be required to implement the new revenue recognition standard for the first quarter of fiscal year 2018. InvenSense is currently evaluating the impact on its consolidated financial statements. |
Fair Value Measurements | ' |
The Company applies the provisions of ASC 820-10, “Fair Value Measurements”. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. 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. ASC 820-10 requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements. The standard describes a fair value hierarchy based on three levels of inputs that may be used to measure fair value. The inputs for the first two levels are considered observable and the last is unobservable and include the following: |
Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; |
Level 2—Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; or |
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Level 3—Unobservable inputs in which there is little or no market data, and as a result, prices or valuation techniques are employed that require inputs that are significant to the fair value measurement. |