FAIR VALUE MEASUREMENTS

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



	Level 1		Level 2		Total
ASSETS:
Cash equivalents:
U.S. Treasury money market funds	$	99,117	$	—	$	99,117
Foreign government securities	—		10,659		10,659
U.S. government securities	—		90,441		90,441
Corporate debt securities	—		1,855		1,855
Commercial paper	—		335,663		335,663
Short-term investments:
Foreign government securities	—		395,797		395,797
U.S. government securities	—		456,494		456,494
Corporate debt securities	—		305,260		305,260
Commercial paper	—		11,688		11,688
U.S. government agency securities	—		2,007		2,007
Foreign exchange derivatives	—		363		363
Long-term investments:
Foreign government securities	—		719,631		719,631
U.S. government securities	—		578,450		578,450
Corporate debt securities	—		4,276,614		4,276,614
U.S. municipal securities	—		1,083		1,083
Ctrip convertible debt securities	—		1,378,550		1,378,550
Ctrip equity securities	977,035		—		977,035
Total assets at fair value	$	1,076,152	$	8,564,555	$	9,640,707



	Level 1		Level 2		Total
LIABILITIES:
Foreign exchange derivatives	$	—	$	644	$	644

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



	Level 1		Level 2		Total
ASSETS:
Cash equivalents:
U.S. Treasury 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 convertible 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 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, U.S. and foreign government securities, commercial paper, government agency securities, convertible 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 December 31, 2015 and 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. As of December 31, 2015, the Company held investments in equity securities of private companies of approximately $62.3 million and these investments are accounted for under the cost method of accounting (see Note 4). See Note 4 for information on the carrying value of investments and Note 10 for the estimated fair value of the Company's outstanding Senior Notes. See Note 19 for the Company's contingent liabilities associated with business acquisitions.

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 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 December 31, 2015 and 2014, there were no outstanding derivative contracts related to foreign currency translation risk. Foreign exchange losses of $6.6 million for the year ended December 31, 2015, and foreign exchange gains of $13.7 million and $0.3 million for the years ended December 31, 2014 and 2013, respectively, were recorded related to these derivatives in "Foreign currency transactions and other" in the Consolidated Statements of Operations.

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 December 31, 2015 associated with foreign currency transaction risks resulted in a net liability of $0.3 million, with a liability in the amount of $0.7 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 Consolidated Balance Sheet. Foreign exchange derivatives outstanding as of December 31, 2014 associated with foreign exchange transaction risks resulted in a net asset of $0.2 million, with an asset in the amount of $0.3 million recorded in "Prepaid expense and other current assets" and a liability in the amount of $0.1 million recorded in "Accrued expenses and other current liabilities" in the Consolidated Balance Sheet. Derivatives associated with these transaction risks resulted in foreign exchange losses of $15.3 million and $21.8 million for the years ended December 31, 2015 and 2014, respectively, and foreign exchange gains of $3.6 million for the year ended December 31, 2013. 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 $13.8 million, $11.8 million and $5.5 million for the years ended December 31, 2015, 2014 and 2013, respectively. These net impacts are reported in “Foreign currency transactions and other” in the Consolidated Statements of Operations.

The settlement of derivative contracts not designated as hedging instruments resulted in net cash outflows of $33.9 million and $8.9 million for the years ended December 31, 2015 and 2014, respectively, and a net cash inflow of $4.4 million for the year ended December 31, 2013, respectively, and were reported within "Net cash provided by operating activities" in the 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 December 31, 2015 and 2014. A net cash inflow of $5.2 million for the year ended December 31, 2015 and net cash outflows of $80.3 million and $78.6 million for the years ended December 31, 2014 and 2013, respectively, were reported within "Net cash used in investing activities" in the Consolidated Statements of Cash Flows.