|ENVISION HEALTHCARE CORP filed this Form 10-Q on 11/03/2017|
In determining the fair value of assets and liabilities that are measured on a recurring basis at September 30, 2017 and December 31, 2016, with the exception of contingent purchase price payables, the Company utilized Level 1 and 2 inputs to perform such measurements methods, which were commensurate with the market approach. The Company utilizes Level 3 inputs to measure the fair value of the contingent consideration. There were no transfers to or from Levels 1 and 2 during the three and nine months ended September 30, 2017. The Company's non-patient receivables and accounts payable are reflected in the financial statements at cost, which approximates fair value.
The following table summarizes the valuation of the Company’s financial instruments by the above fair value hierarchy levels as of September 30, 2017 and December 31, 2016 (in millions):
The following table summarizes the change in financial instruments classified as Level 3 in the fair value hierarchy as of September 30, 2017 (in millions):
Insurance collateral is comprised of investments in U.S. Treasuries and marketable equity and debt securities held by the Company’s wholly owned captive insurance subsidiaries that support the Company’s insurance programs and reserves, as well as cash deposits with third parties. Certain of these investments, if sold or otherwise liquidated, would have to be replaced by other suitable financial assurances and are, therefore, considered restricted. These investments are designated as available-for-sale and reported at fair value with the related temporary unrealized gains and losses reported as a separate component of accumulated other comprehensive income (loss), net of deferred income tax. Declines in the fair value of a marketable investment security which are determined to be other-than-temporary are recognized in the statements of operations, thus establishing a new cost basis for such investment. Investment income earned on these investments is reported as a component of other income, net in the accompanying statements of operations. Realized gains and losses are determined based on an average cost basis.
Investments are generally classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.