Item 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our financial instruments that are exposed to concentrations of credit risk principally consist of cash and cash equivalents, marketable securities, accounts receivable, and contract assets – commission receivable.
Our cash, cash equivalents, short-term marketable securities, and restricted cash are summarized as follows (in thousands):
December 31, 2021 December 31, 2020
Cash and cash equivalents (1) (2)
$ 81,926 $ 43,759
Short-term marketable securities (2)
41,306 49,620
Restricted cash 3,239 3,354
Total cash, cash equivalents, short-term marketable securities, and restricted cash $ 126,471 $ 96,733
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(1) We deposit our cash and cash equivalents in accounts with major banks and financial institutions and such deposits are in excess of federally insured limits. We also have deposits with a major bank in China that are denominated in both U.S. dollars and Chinese Yuan Renminbi and are not insured by the U.S. federal government.
(2) See Note 4 – Fair Value Measurements in our Notes to Consolidated Financial Statements for more information on our cash and cash equivalents and marketable securities.
Our portfolio of available-for-sale debt securities is exposed to credit and interest rate risk. As of December 31, 2021, we invested $41.3 million in marketable securities primarily consisting of commercial paper and agency bonds with credit rating of AA+ or equivalent by S&P Rating and Moody's Investor Services. The maturity of these securities were below two years. See Note 4 – Fair Value Measurements in our Notes to Consolidated Financial Statements for further discussion on our available-for-sale debt securities.
As of December 31, 2021, our net contract assets consisted of commissions receivable balance of $908.3 million. Our contracts with carriers expose us to credit risk that a financial loss could be incurred if the counterparty does not fulfill its financial obligation. While we are exposed to credit losses due to the non-performance of our counterparties, we consider the risk of this remote. We estimate our maximum credit risk in determining the commissions receivable amount recorded on the balance sheet. Upon the adoption of ASC 326, we recorded $1.5 million of allowance for credit losses for our commissions receivable balance as of January 1, 2020. During the years ended December 31, 2021 and 2020, we recorded additional allowances for credit losses $0.2 million and $0.5 million. respectively. See Note 1 – Summary of Business and Significant Accounting Policies i n our Notes to Consolidated Financial
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Statements for additional information regarding the accounting standard adoption.
Our total contract assets and accounts receivable as of December 31, 2021 and December 31, 2020 are summarized as follows (in thousands):
December 31, 2021 December 31, 2020
Contract assets – commissions receivable – current $ 254,821 $ 219,153
Contract assets – commissions receivable – non-current 653,441 573,252
Accounts receivable 5,750 1,799
Total contract assets and accounts receivable $ 914,012 $ 794,204
Foreign Currency Exchange Risk
Substantially all of our revenue has been derived from transactions denominated in United States Dollars. We have exposure to adverse changes in exchange rates associated with operating expenses of our foreign operations, which are denominated in Chinese Yuan Renminbi. Foreign currency fluctuations have not had a material impact historically on our results of operations; however, they may in the future. We have not engaged in any foreign currency hedging or other derivative transactions to date.
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