Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurement

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Fair Value Measurement
6 Months Ended
Dec. 31, 2021
Fair Value Disclosures [Abstract]  
Fair Value Measurement

Note 16. Fair Value Measurement

 

Fair value is defined as the price that would be received upon selling an asset or the price paid to transfer a liability on the measurement date. It focuses on the exit price in the principal or most advantageous market for the asset or liability in an orderly transaction between willing market participants. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair values are as follows:

 

Level 1: Observable prices in active markets for identical assets and liabilities.

 

Level 2: Observable inputs other than quoted prices in active markets for identical assets and liabilities.

 

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities.

 

The following table sets forth a summary of the changes in the fair value of Level 3 contingent consideration that are measured at fair value on a recurring basis:

 

Contingent consideration   December 31,
2021
    December 31,
2020
 
Beginning balance   $
    $
      —
 
Initial fair value of contingent consideration     1,082      
 
Change in fair value of contingent consideration    
     
 
Ending balance   $ 1,082     $
 

 

The fair value of contingent consideration liabilities that was classified as Level 3 in the table above was estimated using a Monte Carlo simulation in an option pricing framework with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC 820. The significant inputs in the Level 3 measurement not supported by market activity include the probability assessments of expected future sales revenue of RFMi products in each of calendar year 2022 and 2023 and the volatility of those revenues, appropriately discounted considering the uncertainties associated with the obligation, and as calculated in accordance with the terms of the acquisition agreements. The development and determination of the unobservable inputs for Level 3 fair value measurements and the fair value calculations are the responsibility of the Company’s chief financial officer and are approved by the chief executive officer.