Note 6 - Fair Value Measurement of Assets and Liabilities

9 Months Ended

Sep. 30, 2011

Fair Value Measurement of Assets and Liabilities Disclosure [Abstract]

Fair Value Measurement of Assets and Liabilities

Fair Value Measurement of Assets and Liabilities

The following tables summarize our financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2011 and December 31, 2010:

Description	Balance as of September 30, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
	(In thousands)
Assets:
Cash and cash equivalents	$	2,998,950	$	2,998,950	$	—
Short-term investments:
Restricted cash	21,619		21,619		—
Corporate debt securities	428,895		—		428,895
Government and agency securities	44,342		—		44,342
Time deposits	82,292		—		82,292
Equity instruments	436,776		436,776		—
Total short-term investments	1,013,924		458,395		555,529
Derivatives	70,780		—		70,780
Long-term investments:
Restricted cash	2,423		2,423		—
Corporate debt securities	2,126,273		—		2,126,273
Government and agency securities	82,465		—		82,465
Time deposits and other	5,112		—		5,112
Total long-term investments	2,216,273		2,423		2,213,850
Total financial assets	$	6,299,927	$	3,459,768	$	2,840,159
Liabilities:
Derivatives	$	32,906	$	—	$	32,906

Description	Balance as of December 31, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
	(In thousands)
Assets:
Cash and cash equivalents	$	5,577,411	$	5,577,411	$	—
Short-term investments:
Restricted cash	20,351		20,351		—
Corporate debt securities	372,225		—		372,225
Government and agency securities	66,534		—		66,534
Time deposits	44,772		—		44,772
Equity instruments	541,521		541,521		—
Total short-term investments	1,045,403		561,872		483,531
Derivatives	37,196		—		37,196
Long-term investments:
Restricted cash	1,332		1,332		—
Corporate debt securities	1,605,770		—		1,605,770
Government and agency securities	150,966		—		150,966
Time deposits and other	4,541		—		4,541
Total long-term investments	1,762,609		1,332		1,761,277
Total financial assets	$	8,422,619	$	6,140,615	$	2,282,004
Liabilities:
Derivatives	$	4,963	$	—	$	4,963

Our financial assets and liabilities are valued using market prices on both active markets (level 1) and less active markets (level 2). Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 instrument valuations are obtained from readily available pricing sources for comparable instruments. Our derivative instruments are valued using pricing models that take into account the contract terms as well as multiple inputs where applicable, such as equity prices, interest rate yield curves, option volatility and currency rates. Our derivative instruments are short-term in nature, typically one month to one year in duration. Cash and cash equivalents are short-term, highly liquid investments with original or remaining maturities of three months or less when purchased and are mainly comprised of bank deposits and money market funds.

In addition to the long-term investments noted above, we had approximately $802.3 million and $729.4 million of cost and equity method investments included in long-term investments on our condensed consolidated balance sheet at September 30, 2011 and December 31, 2010, respectively. Our long-term equity investments primarily pertain to our retained 30% interest in Skype. On October 13, 2011, Microsoft Corp. completed its acquisition of Skype and we received approximately $2.3 billion in cash for our 30% interest in Skype, resulting in a pre-tax gain of approximately $1.7 billion, which will be recognized in the fourth quarter of 2011. In conjunction with the sale of Skype, in the third quarter of 2011, we recognized our portion of Skype's second and third quarter financial results in our consolidated results of operations.

In Europe, we have two cash pooling arrangements with a financial institution for cash management purposes. These arrangements allow for cash withdrawals from this financial institution based upon our aggregate operating cash balances held in Europe within the same financial institution (“Aggregate Cash Deposits”). These arrangements also allow us to withdraw amounts exceeding the Aggregate Cash Deposits up to an agreed-upon limit. The net balance of the withdrawals and the Aggregate Cash Deposits are used by the financial institution as a basis for calculating our net interest expense or income. As of September 30, 2011, we had a total of $3.5 billion in cash withdrawals offsetting our $3.5 billion in Aggregate Cash Deposits held within the same financial institution under these cash pooling arrangements.

Other financial instruments, including accounts receivable, loans and interest receivable, funds receivable, customer accounts, commercial paper, accounts payable, funds payable and amounts due to customers are carried at cost, which approximates their fair value because of the short-term nature of these instruments. Funds receivable include receivables from promotional credit products offered to certain customers that settle within 12 months ($192.0 million as of September 30, 2011).