Ownership percentage, equity method investment

[Table of](#i090043fcb1da400aaac214abf3d3ee98_7) [Contents](#i090043fcb1da400aaac214abf3d3ee98_7)NOTE 14. INVESTMENTSCadence has a portfolio of equity investments that includes investments in both marketable and non-marketable securities. These investments primarily consist of cash investments in companies with technologies or services that are potentially strategically important to Cadence.Marketable Equity InvestmentsCadence’s investment in marketable equity securities consists of purchased shares of a publicly held company and is included in prepaid expenses and other in Cadence’s consolidated balance sheets. Changes in the fair value of these investments is recorded to other income, net in Cadence’s consolidated income statements.Non-Marketable Equity InvestmentsCadence’s investments in non-marketable equity securities generally consist of stock, convertible debt or other instruments of privately held entities and are included in other assets on Cadence’s consolidated balance sheets. Cadence holds a 16% interest in a privately held company that is accounted for using the equity method of accounting. The carrying value of this investment was $125.9 million and $130.7 million as of January 1, 2022 and January 2, 2021, respectively. During fiscal 2021 and fiscal 2020, Cadence recorded losses of $1.1 million and $4.6 million, respectively, to other income, net in Cadence’s consolidated income statements, which represented Cadence’s proportionate share of net income from the investee, offset by amortization of basis differences.Cadence also holds other non-marketable investments in privately held companies where Cadence does not have the ability to exercise significant influence and the fair value of the investments is not readily determinable. The carrying value of these investments was $1.6 million and $1.6 million as of January 1, 2022 and January 2, 2021, respectively. Gains and losses on these investments are recorded to other income, net in Cadence’s consolidated income statements and were not material to Cadence’s consolidated financial statements for fiscal 2021, 2020 or 2019.NOTE 15. FAIR VALUEInputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect Cadence’s market assumptions. These two types of inputs have created the following fair value hierarchy:•Level 1 – Quoted prices for identical instruments in active markets;•Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and•Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.This hierarchy requires Cadence to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. Cadence recognizes transfers between levels of the hierarchy based on the fair values of the respective financial instruments at the end of the reporting period in which the transfer occurred. There were no transfers between levels of the fair value hierarchy during fiscal 2021. On a quarterly basis, Cadence measures at fair value certain financial assets and liabilities. The fair value of financial assets and liabilities was determined using the following levels of inputs as of January 1, 2022 and January 2, 2021:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|   | Fair Value Measurements as of January 1, 2022: |
|    | Total |  | Level 1 |  | Level 2 |  | Level 3 |
|   | (In thousands) |
| Assets |  |
| Cash equivalents: |  |  |  |  |  |  |  |
| Money market funds | $ | 658,474  |  |  | $ | 658,474  |  |  | $ | —  |  |  | $ | —  |  |
| Marketable equity securities | 5,956  |  |  | 5,956  |  |  | —  |  |  | —  |  |
| Securities held in NQDC trust | 56,165  |  |  | 56,165  |  |  | —  |  |  | —  |  |
|  |  |  |  |  |  |  |  |
| Total Assets | $ | 720,595  |  |  | $ | 720,595  |  |  | $ | —  |  |  | $ | —  |  |
|  |  |  |  |  |  |  |  |

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