Fair Value Measurements

Fair value is an exit price representing the amount that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. 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 a liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1 — Observable inputs that reflect quoted prices for identical assets or liabilities in active markets.

Level 2 — Other inputs that are directly or indirectly observable in the marketplace.

Level 3 — Unobservable inputs that are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company’s Level 1 assets include institutional money-market funds that are classified as cash equivalents and marketable investments in U.S. government and agency debt, which are valued primarily using quoted market prices. The Company’s Level 2 assets include its marketable investments in time deposits, corporate debt securities, foreign government and agency debt, municipal debt securities and asset backed securities as the market inputs used to value these instruments consist of market yields, reported trades and broker/dealer quotes, which are corroborated with observable market data. In addition, forward contracts, and the severance pay fund are classified as Level 2 assets as the valuation inputs are based on quoted prices and market observable data of similar instruments. The Company’s investments in auction rate securities are classified as Level 3 assets because there are currently no active markets for the auction rate securities and consequently the Company is unable to obtain independent valuations from market sources. Therefore, the auction rate securities are valued using a discounted cash flow model. Some of the inputs to the discounted cash flow model are unobservable in the market.

The tables below set forth, by level, the Company’s assets and liabilities that are measured at fair value on a recurring basis. The tables do not include assets and liabilities that are measured at historical cost or any basis other than fair value (in thousands):



	Fair Value Measurements at February 3, 2018
	Level 1		Level 2		Level 3		Total
Items measured at fair value on a recurring basis:
Assets
Cash equivalents:
Money market funds	$	18,503	$	—	$	—	$	18,503
Time deposits	—		65,117		—		65,117
U.S. government and agency debt	51,589		—		—		51,589
Municipal debt securities	—		5,290		—		5,290
Corporate debt securities	—		127,076		—		127,076
Short-term investments:
Time deposits	—		150,000		—		150,000
U.S. government and agency debt	247,741		—		—		247,741
Foreign government and agency debt	—		6,987		—		6,987
Municipal debt securities	—		2,728		—		2,728
Corporate debt securities	—		503,079		—		503,079
Asset backed securities	—		42,255		—		42,255
Other non-current assets:
Severance pay fund	—		896		—		896
Total assets	$	317,833	$	903,428	$	—	$	1,221,261



	Fair Value Measurements at January 28, 2017
	Level 1		Level 2		Level 3		Total
Items measured at fair value on a recurring basis:
Assets
Cash equivalents:
Money market funds	$	36,122	$	—	$	—	$	36,122
Time deposits	—		67,000		—		67,000
U.S. government and agency debt	17,497		—		—		17,497
Foreign government and agency debt	—		1,500		—		1,500
Municipal debt securities	—		8,740		—		8,740
Corporate debt securities	—		31,280		—		31,280
Short-term investments:
Time deposits	—		150,000		—		150,000
U.S. government and agency debt	185,387		—		—		185,387
Foreign government and agency debt	—		13,375		—		13,375
Municipal debt securities	—		27,871		—		27,871
Corporate debt securities	—		432,108		—		432,108
Asset backed securities	—		45,527		—		45,527
Prepaid expenses and other current assets:
Foreign currency forward contracts	—		735		—		735
Long-term investments:
Auction rate securities	—		—		4,615		4,615
Other non-current assets:
Severance pay fund	—		736		—		736
Total assets	$	239,006	$	778,872	$	4,615	$	1,022,493
Liabilities
Accrued liabilities:
Foreign currency forward contracts	$	—	$	58	$	—	$	58

The following table summarizes the change in fair values for Level 3 assets for the years ended February 3, 2018 and January 28, 2017 (in thousands):



	Level 3
Changes in fair value during the year (pre-tax):
Balance at January 30, 2016	$	11,296
Sales, redemption and settlement	(6,681		)
Unrealized gain included in accumulated other comprehensive income	—
Balance at January 28, 2017	4,615
Sales, redemption and settlement	(4,550		)
Realized loss	(65		)
Balance at February 3, 2018	$	—

There were no transfers of assets between levels in either fiscal 2018 or 2017.