Fair Value Measurements

6 Months Ended

Jun. 30, 2022

We measure our cash equivalents, certain investments, contingent consideration liabilities and foreign exchange forward and option contracts at fair value. Fair value is the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions.

The fair value hierarchy consists of the following three levels:

•Level 1 – Inputs are quoted prices in active markets for identical assets or liabilities.

•Level 2 – Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data.

•Level 3 – Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

The following table summarizes the financial assets and (liabilities) measured at fair value on a recurring basis as of June 30, 2022:


(in millions)	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	360	$	—	$	—	$	360
Time deposits	—		229		—		229
Commercial paper	—		205		—		205
Short-term investments:
Time deposits	—		40		—		40
Equity investment security	26		—		—		26
Available-for-sale investment securities:
Certificates of deposit and commercial paper	—		448		—		448
Other current assets:
Foreign exchange forward contracts	—		9		—		9
Long-term investments:
Restricted time deposits(1)	—		375		—		375


Accrued expenses and other current liabilities:
Foreign exchange forward and option contracts	—		(21)		—		(21)
Contingent consideration liabilities	—		—		(21)		(21)
Other noncurrent liabilities:
Foreign exchange forward contracts	—		(10)		—		(10)
Contingent consideration liabilities	—		—		(16)		(16)

(1)See Note 6.

The following table summarizes the financial assets and (liabilities) measured at fair value on a recurring basis as of December 31, 2021:


(in millions)	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	507	$	—	$	—	$	507
Time deposits	—		4		—		4
Commercial paper	—		266		—		266
Short-term investments:
Time deposits	—		554		—		554
Equity investment security	26		—		—		26
Available-for-sale investment securities:
Commercial paper	—		310		—		310
Other current assets:
Foreign exchange forward and option contracts	—		54		—		54
Long-term investments:
Restricted time deposits(1)	—		397		—		397
Other noncurrent assets:
Foreign exchange forward and option contracts	—		15		—		15
Accrued expenses and other current liabilities:
Foreign exchange forward and option contracts	—		(7)		—		(7)
Contingent consideration liabilities	—		—		(14)		(14)
Other noncurrent liabilities:

Contingent consideration liabilities	—		—		(21)		(21)

(1)See Note 6.

The following table summarizes the changes in Level 3 contingent consideration liabilities for the six months ended June 30:


(in millions)	2022		2021
Beginning balance	$	35	$	54
Initial measurement recognized at acquisition	1		8
Change in fair value recognized in SG&A expenses	5		(19)
Payments	(4)		(3)
Ending balance	$	37	$	40

We measure the fair value of money market funds based on quoted prices in active markets for identical assets and measure the fair value of our equity investment security based on the published daily net asset value at which investors can freely subscribe to or redeem from the fund. The fair value of certificates of deposit and commercial paper is measured based on relevant trade data, dealer quotes, or model-driven valuations using significant inputs derived from or corroborated by observable market data, such as yield curves and credit spreads. The carrying value of the time deposits approximated fair value as of June 30, 2022 and December 31, 2021.

We estimate the fair value of each foreign exchange forward contract by using a present value of expected cash flows model. This model calculates the difference between the current market forward price and the contracted forward price for each foreign exchange forward contract and applies the difference in the rates to each outstanding contract. The market forward rates include a discount and credit risk factor. We estimate the fair value of each foreign exchange option contract by using a variant of the Black-Scholes model. This model uses present value techniques and reflects the time value and intrinsic value based on observable market rates.

We estimate the fair value of contingent consideration liabilities associated with acquisitions using a variation of the income approach, which utilizes one or more significant inputs that are unobservable. This approach calculates the fair value of such liabilities based on the probability-weighted expected performance of the acquired entity against the target performance metric, discounted to present value when appropriate.

During the six months ended June 30, 2022 and the year ended December 31, 2021, there were no transfers among Level 1, Level 2 or Level 3 financial assets and liabilities.