Fair Value Measurement of Assets and Liabilities

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurement of Assets and Liabilities

Fair Value Measurement of Assets and Liabilities

The following tables present our financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2018 and December 31, 2017 (in millions):

	September 30, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant  Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	2,086	$	2,051	$	35	$	—
Short-term investments:
Restricted cash	15		15		—		—
Corporate debt securities	2,696		—		2,696		—
Government and agency securities	41		—		41		—
Total short-term investments	2,752		15		2,737		—
Derivatives	363		—		87		276
Long-term investments:
Corporate debt securities	4,132		—		4,132		—
Total long-term investments	4,132		—		4,132		—
Total financial assets	$	9,333	$	2,066	$	6,991	$	276
Liabilities:
Derivatives	$	55	$	—	$	55	$	—

	December 31, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Assets:
Cash and cash equivalents	$	2,120	$	2,120	$	—
Short-term investments:
Restricted cash	20		20		—
Corporate debt securities	3,723		—		3,723
Total short-term investments	3,743		20		3,723
Derivatives	28		—		28
Long-term investments:
Corporate debt securities	5,446		—		5,446
Total long-term investments	5,446		—		5,446
Total financial assets	$	11,337	$	2,140	$	9,197
Liabilities:
Derivatives	$	29	$	—	$	29

Our financial assets and liabilities are valued using market prices on both active markets (Level 1), less active markets (Level 2) and little or no market activity (Level 3). 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. Level 3 instrument valuations typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability. We did not have any transfers of financial instruments between valuation levels during the nine months ended September 30, 2018.

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. Our warrant, which is accounted for as a derivative instrument, is valued using a Black-Scholes model. Key assumptions used in the valuation include risk-free interest rates; the service provider’s common stock price, equity volatility and common stock outstanding; exercise price; and details specific to the warrant. The value is also probability adjusted for management assumptions with respect to meeting the processing volume milestone targets. Refer to “Note 7 - Derivative Instruments” for further details on our derivative instruments.

Other financial instruments, including accounts receivable and accounts payable, are carried at cost, which approximates their fair value because of the short-term nature of these instruments.

The following table presents a reconciliation of the opening to closing balance of assets measured using significant unobservable inputs (Level 3) as of September 30, 2018 (in millions):

	September 30, 2018
Opening balance as of January 1, 2018	$	—
Recognition of warrant	44
Change in fair value	232
Closing balance as of September 30, 2018	$	276