FAIR VALUE MEASUREMENTS

Financial assets and liabilities carried at fair value as of March 31, 2015 are classified in the tables below in the categories described below (in thousands):



	Level 1		Level 2		Total
ASSETS:
Cash equivalents:
Money market funds	$	286,477	$	—	$	286,477
Foreign government securities	—		386,404		386,404
U.S. government securities	—		1,241,506		1,241,506
Commercial paper	—		221,735		221,735
Short-term investments:
Foreign government securities	—		141,266		141,266
U.S. government securities	—		655,744		655,744
Corporate debt securities	—		545,810		545,810
Commercial paper	—		32,198		32,198
U.S. government agency securities	—		4,623		4,623
Foreign exchange derivatives	—		374		374
Long-term investments:
Foreign government securities	—		311,254		311,254
U.S. government securities	—		701,517		701,517
Corporate debt securities	—		3,042,667		3,042,667
U.S. government agency securities	—		2,546		2,546
U.S. municipal securities	—		1,107		1,107
Ctrip corporate debt securities	—		482,512		482,512
Ctrip equity securities	432,041		—		432,041
Total assets at fair value	$	718,518	$	7,771,263	$	8,489,781



	Level 1		Level 2		Total
LIABILITIES:
Foreign exchange derivatives	$	—	$	493	$	493

Financial assets and liabilities carried at fair value as of December 31, 2014 are classified in the tables below in the categories described below (in thousands):



	Level 1		Level 2		Total
ASSETS:
Cash equivalents:
Money market funds	$	155,608	$	—	$	155,608
Foreign government securities	—		974,855		974,855
U.S. government securities	—		676,503		676,503
Corporate debt securities	—		45,340		45,340
Commercial paper	—		382,544		382,544
U.S. government agency securities	—		10,000		10,000
Short-term investments:
Foreign government securities	—		52,490		52,490
U.S. government securities	—		364,266		364,266
Corporate debt securities	—		581,523		581,523
Commercial paper	—		39,092		39,092
U.S. government agency securities	—		104,811		104,811
Foreign exchange derivatives	—		336		336
Long-term investments:
Foreign government securities	—		12,671		12,671
U.S. government securities	—		556,448		556,448
Corporate debt securities	—		2,329,033		2,329,033
U.S. government agency securities	—		95,094		95,094
U.S. municipal securities	—		1,102		1,102
Ctrip corporate debt securities	—		425,961		425,961
Ctrip equity securities	335,344		—		335,344
Total assets at fair value	$	490,952	$	6,652,069	$	7,143,021



	Level 1		Level 2		Total
LIABILITIES:
Foreign exchange derivatives	$	—	$	129	$	129

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 that 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 corporate debt securities, sovereign debt, commercial paper, government agency securities, corporate debt securities and municipal 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 of these investments. 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.

As of March 31, 2015 and December 31, 2014, the Company's cash consisted of bank deposits and cash held in investment accounts. Other financial assets and liabilities, including restricted cash, accounts receivable, accounts payable, accrued expenses and deferred merchant bookings are carried at cost which 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 8 for the estimated fair value of the Company's outstanding Senior Notes. The Company's contingent liabilities associated with business acquisitions are considered "Level 3" fair value measurements (see Note 12).

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. The Company does not use derivatives for trading or speculative purposes. All derivative instruments are recognized in the Unaudited Consolidated Balance Sheets at fair value. Gains and losses resulting from changes in the fair value of derivative instruments that are not designated as hedging instruments for accounting purposes are recognized in the Unaudited Consolidated Statements of Operations in the period that the changes occur. Changes in the fair value of derivatives designated as net investment hedges are recorded as currency translation adjustments to offset a portion of the translation adjustment from Euro-denominated net assets held by certain subsidiaries and are recognized in the Unaudited Consolidated Balance Sheets in "Accumulated other comprehensive loss."

Derivatives Not Designated as Hedging Instruments — The Company is exposed to adverse movements in currency exchange rates as the operating results of its international operations 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 versus the U.S. Dollar. As of March 31, 2015 and December 31, 2014, there were no outstanding derivative contracts related to foreign currency translation risk. Foreign exchange gains of $1.9 million for the three months ended March 31, 2015 compared to foreign exchange losses of $0.3 million for the three months ended March 31, 2014, are recorded in "Foreign currency transactions and other" in the Unaudited Consolidated Statements of Operations related to these derivatives.

The Company also enters into foreign currency forward contracts to hedge its exposure to the impact of movements in currency exchange rates on its transactional balances denominated in currencies other than the functional currency. Foreign exchange derivatives outstanding as of March 31, 2015 associated with foreign currency transaction risks resulted in a net liability of $0.1 million, with a liability in the amount of $0.5 million recorded in "Accrued expenses and other current liabilities" and an asset in the amount of $0.4 million recorded in "Prepaid expenses and other current assets" in the Unaudited Consolidated Balance Sheet. Foreign exchange derivatives outstanding as of December 31, 2014 associated with foreign exchange transactions resulted in a net asset of $0.2 million, with an asset in the amount of $0.3 million recorded in "Prepaid expenses and other current assets" and a liability in the amount of $0.1 million recorded in "Accrued expenses and other current liabilities" in the Unaudited Consolidated Balance Sheet. Derivatives associated with these transaction risks resulted in foreign exchange losses of $32.0 million for the three months ended March 31, 2015 compared to foreign exchange gains of $0.6 million for the three months ended March 31, 2014. These mark to market adjustments on the derivative contracts, offset by the effect of changes in currency exchange rates on transactions denominated in currencies other than the functional currency, resulted in net losses of $6.1 million and $0.6 million for the three months ended March 31, 2015 and 2014, respectively. The net impacts related to these derivatives are recorded in "Foreign currency transactions and other" in the Unaudited Consolidated Statements of Operations.

The settlement of derivative contracts not designated as hedging instruments resulted in a net cash outflow of $26.1 million for the three months ended March 31, 2015 compared to a net cash inflow of $0.2 million for the three months ended March 31, 2014, and are reported within "Net cash provided by operating activities" in the Unaudited Consolidated Statements of Cash Flows.

Derivatives Designated as Hedging Instruments — The Company had no foreign currency forward contracts designated as hedges of its net investment in a foreign subsidiary outstanding as of March 31, 2015 or December 31, 2014. A net cash inflow of $5.2 million for the three months ended March 31, 2015, compared to a net cash outflow of $43.4 million for the three months ended March 31, 2014, are reported within "Net cash used in investing activities" in the Unaudited Consolidated Statements of Cash Flows.