Fair Value Measurement of Assets and Liabilities

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [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 June 30, 2015 and December 31, 2014:

Description	Balance as of June 30, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
	(In millions)
Assets:
Cash and cash equivalents	$	4,971	$	3,939	$	1,032
Short-term investments:
Restricted cash	44		44		—
Corporate debt securities	3,737		—		3,737
Government and agency securities	595		—		595
Time deposits	56		—		56
Equity instruments	1,151		1,151		—
Total short-term investments	5,583		1,195		4,388
Funds receivable and customer accounts	5,839		—		5,839
Derivatives	181		—		181
Long-term investments:
Corporate debt securities	5,664		—		5,664
Government and agency securities	51		—		51
Total long-term investments	5,715		—		5,715
Total financial assets	$	22,289	$	5,134	$	17,155
Liabilities:
Derivatives	$	61	$	—	$	61

Description	Balance as of December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
	(In millions)
Assets:
Cash and cash equivalents	$	6,299	$	3,888	$	2,411
Short-term investments:
Restricted cash	29		29		—
Corporate debt securities	2,519		—		2,519
Government and agency securities	3		—		3
Time deposits	181		—		181
Equity instruments	1,037		1,037		—
Total short-term investments	3,769		1,066		2,703
Funds receivable and customer accounts	4,161		—		4,161
Derivatives	219		—		219
Long-term investments:
Corporate debt securities	5,319		—		5,319
Government and agency securities	233		—		233
Total long-term investments	5,552		—		5,552
Total financial assets	$	20,000	$	4,954	$	15,046
Liabilities:
Derivatives	$	27	$	—	$	27

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, identical instruments in less active markets, or models using market observable inputs. The majority of 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. We did not have any transfers of financial instruments between valuation levels during the six months ended June 30, 2015.

Cash and cash equivalents are short-term, highly liquid investments with original or remaining maturities of three months or less when purchased and are comprised primarily of bank deposits, certificates of deposit and commercial paper. We had total funds receivable and customer accounts of $11.4 billion as of June 30, 2015, of which $5.8 billion was invested in time deposits and U.S. and foreign government and agency securities. We elect to account for certain customer accounts, including foreign-currency denominated available-for-sale investments, under the fair value option. Election of the fair value option allows us to significantly reduce the accounting asymmetry that would otherwise arise when recognizing foreign exchange gains and losses relating to available-for-sale investments and the corresponding customer liabilities.

In addition, we had cost and equity method investments of approximately $166 million and $215 million included in long-term investments on our condensed consolidated balance sheet at June 30, 2015 and December 31, 2014, respectively.

Our derivative instruments vary in duration depending on contract type. Our foreign exchange derivative contracts are primarily short-term in nature, generally one month to one year in duration. Certain foreign currency contracts designated as cash flow hedges may have a duration of up to 18 months. The duration of our interest rate derivative contracts match the duration of the fixed rate notes due 2019, 2021 and 2024.

As of June 30, 2015 and December 31, 2014, we held no direct investments in auction rate securities, collateralized debt obligations, structured investment vehicles or mortgage-backed securities.

Other financial instruments, including accounts receivable, loans and interest receivable, accounts payable, funds receivable, certain customer accounts, 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.