FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2012

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

Financial assets carried at fair value as of December 31, 2012 are classified in the table below in the categories described below (in thousands):

	Level 1		Level 2		Level 3		Total
ASSETS:
Short-term investments:
Foreign government securities	$	—	$	1,886,553	$	—	$	1,886,553
U.S. government securities	—		1,760,292		—		1,760,292
Foreign exchange derivatives	—		1,038		—		1,038
Total assets at fair value	$	—	$	3,647,883	$	—	$	3,647,883

	Level 1		Level 2		Level 3		Total
LIABILITIES:
Foreign exchange derivatives	$	—	$	63,151	$	—	$	63,151
Redeemable noncontrolling interests	—		—		160,287		160,287
Total liabilities at fair value	$	—	$	63,151	$	160,287	$	223,438

Financial assets and liabilities are carried at fair value as of December 31, 2011 are classified in the tables below in the categories described below (in thousands):

	Level 1		Level 2		Level 3		Total
ASSETS:
Short-term investments:
Foreign government securities	$	—	$	1,074,186	$	—	$	1,074,186
U.S. government securities	—		923,322		—		923,322
U.S. agency securities	—		26,951		—		26,951
U.S. corporate notes	—		368		—		368
Foreign exchange derivatives	—		60,455		—		60,455
Total assets at fair value	$	—	$	2,085,282	$	—	$	2,085,282

	Level 1		Level 2		Level 3		Total
LIABILITIES:
Foreign exchange derivatives	$	—	$	1,107	$	—	$	1,107
Redeemable noncontrolling interests	—		—		127,045		127,045
Total liabilities at fair value	$	—	$	1,107	$	127,045	$	128,152

There are three levels of inputs to measure fair value.  The definition of each input is described below:

Level 1: Quoted prices in active markets that are accessible by the Company at the measurement date for identical assets and liabilities.

Level 2: Inputs are observable, either directly or indirectly. Such prices may be based upon quoted prices for identical or comparable securities in active markets or inputs not quoted on active markets, but corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available.

Investments in U.S. Treasury securities and foreign government securities are considered "Level 2" valuations because the Company has access to quoted prices, but does not have visibility to the volume and frequency of trading for all investments.  Fair values for U.S. agency securities and corporate notes are considered "Level 2" valuations because they are obtained from pricing sources for these or comparable instruments.  For the Company’s investments, a market approach is used for recurring fair value measurements and the valuation techniques use inputs that are observable, or can be corroborated by observable data, in an active marketplace.

The Company’s derivative instruments are valued using pricing models.  Pricing models take into account the contract terms as well as multiple inputs where applicable, such as interest rate yield curves, option volatility and currency rates.  Derivatives are considered "Level 2" fair value measurements.  The Company’s derivative instruments are typically short-term in nature.

The Company considers its redeemable noncontrolling interests to represent a "Level 3" fair value measurement that requires a high level of judgment to determine fair value.  The fair value of the redeemable noncontrolling interests was determined by industry peer comparable analysis and a discounted cash flow valuation model.  See Note 13 for information on the estimated fair value for redeemable noncontrolling interests.

As of December 31, 2012 and 2011, the carrying value of the Company’s cash and cash equivalents approximated their fair value and consisted primarily of foreign and U.S. government securities and bank deposits.  Other financial assets and liabilities, including restricted cash, accounts receivable, accrued expenses and deferred merchant bookings are carried at cost which also approximates their fair value because of the short-term nature of these items.  See Note 4 for information on the carrying value of investments and Note 11 for the estimated fair value of the Company’s Senior Convertible Notes.

In the normal course of business, the Company is exposed to the impact of foreign currency fluctuations.  The Company limits these risks by following established risk management policies and procedures, including the use of derivatives.  See Note 2 for further information on our accounting policy for derivative financial instruments.

Derivatives Not Designated as Hedging Instruments — The Company is exposed to adverse movements in currency exchange rates as the operating results of its international subsidiaries are translated from local currency into U.S. Dollars upon consolidation. The Company's derivative contracts principally address short-term foreign exchange fluctuations for the Euro and British Pound Sterling. As of December 31, 2012 and 2011, there were no outstanding derivative contracts. Foreign exchange gains of $0.7 million and $4.0 million for the years ended December 31, 2012 and 2011, respectively, were recorded in "Foreign currency transactions and other" in the Consolidated Statements of Operations.

Foreign exchange derivatives outstanding as of December 31, 2012 associated with foreign currency transaction risks resulted in a net asset of $0.3 million, with $0.8 million recorded in "Prepaid expenses and other current assets" and $0.5 million recorded in "Accrued expenses and other current liabilities on the Consolidated Balance Sheet.  Foreign exchange derivatives outstanding at December 31, 2011 associated with foreign exchange transaction risks resulted in a net liability of $0.8 million, with $1.1 million recorded in "Accrued expenses and other current liabilities" and $0.3 million recorded in "Prepaid and other current assets" in the Consolidated Balance Sheet. Foreign exchange gains of $0.8 million for the year ended December 31, 2012 compared to foreign exchange losses of $2.9 million for the year ended December 31, 2011 were recorded in "Foreign currency transactions and other" in the Consolidated Statements of Operations. 

The settlement of derivative contracts not designated as hedging instruments for the year ended December 31, 2012 resulted in a net cash inflow of $1.9 million compared to a net cash outflow of $0.6 million for the year ended December 31, 2011 and are reported within "Net cash provided by operating activities" on the Consolidated Statements of Cash Flows.

Derivatives Designated as Hedging Instruments — As of December 31, 2012 and 2011, the Company had outstanding foreign currency forward contracts with a notional value of 1.5 billion Euros and 860 million Euros, respectively, to hedge a portion of its net investment in a foreign subsidiary.  These contracts are all short-term in nature.  Hedge ineffectiveness is assessed and measured based on changes in forward exchange rates.  The fair value of these derivatives at December 31, 2012 was a net liability of $62.4 million, with $62.6 million recorded in "Accrued expenses and other currents liabilities" and $0.2 million recorded in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet. The fair value of these derivatives at December 31, 2011 was an asset of $60.1 million and was recorded in "Prepaid expenses and other current assets" in the Consolidated Balance Sheet. A net cash inflow of $82.1 million for the year ended December 31, 2012, compared to a net cash outflow of $11.0 million for the year ended December 31, 2011, was reported within "Net cash used in investing activities" on the Consolidated Statements of Cash Flows.