FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES

9 Months Ended

Sep. 30, 2024

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES

FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES

Assets and liabilities measured and recorded at fair value on a recurring basis

The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023:

	Balances as of September 30, 2024		Quoted Prices in active markets for identical Assets (Level 1)		Significant other observable inputs (Level 2)		Balances as of December 31, 2023		Quoted Prices in active markets for identical Assets (Level 1)		Significant other observable inputs (Level 2)
	(In millions)
Cash and Cash Equivalents:
Money Market	$	302	$	302	$	—	$	639	$	639	$	—
U.S. government debt securities (1)	—		—		—		60		60		—
Foreign government debt securities (1)	—		—		—		32		32		—
Restricted Cash and Cash Equivalents:
Money Market (2)	393		393		—		278		278		—
Foreign government debt securities (1)	—		—		—		116		116		—
Investments:
U.S. government debt securities (1)	1,262		1,262		—		1,009		1,009		—
Foreign government debt securities (1) (3)	4,069		4,069		—		2,530		2,530		—
Corporate debt securities	261		261		—		30		30		—
Other Assets:
Derivative Instruments	26		—		26		23		—		23
Customer crypto-assets safeguarding assets	81		—		81		34		—		34
Intangible assets at fair value	34		34		—		24		24		—
Total Assets	$	6,428	$	6,321	$	107	$	4,775	$	4,718	$	57
Salaries and social security payable:
Long-term retention plan	$	133	$	—	$	133	$	104	$	—	$	104
Other Liabilities:
Derivative Instruments	18		—		18		31		—		31
Other	10		—		10		—		—		—
Customer crypto-assets safeguarding liabilities	81		—		81		34		—		34
Total Liabilities	$	242	$	—	$	242	$	169	$	—	$	169

(1) Measured at fair value with impact on the statement of income for the application of the fair value option. (See Note 2 – Summary of significant accounting policies – Fair value option applied to certain financial instruments).

(2) As of September 30, 2024 and December 31, 2023, includes $390 million and $269 million, respectively, of money market funds from securitization transactions. (See Note 5 – Cash, cash equivalents, restricted cash and cash equivalents and investments).

(3) As of September 30, 2024 and December 31, 2023, includes $19 million and $23 million, respectively, of investments from securitization transactions. (See Note 5 – Cash, cash equivalents, restricted cash and cash equivalents and investments).

The Company’s assets and liabilities measured and recorded at fair value on a recurring basis were valued using i) Level 1 inputs: unadjusted quoted prices in active markets (Level 1 instrument valuations are obtained from observable inputs that reflect quoted prices (unadjusted) for identical assets in active markets); ii) Level 2 inputs: obtained from readily-available pricing sources for comparable instruments as well as instruments with inactive markets at the measurement date; and iii) Level 3 inputs: valuations based on unobservable inputs reflecting Company’s assumptions. As of September 30, 2024 and December 31, 2023, there were no assets and liabilities measured and recorded at fair value using level 3 inputs.

There were no transfers to and from Levels 1, 2 and 3 during the nine-month period ended September 30, 2024, nor during the year ended December 31, 2023.

The Company’s election of the fair value option applies to: i) foreign government debt securities and ii) U.S. government debt securities. The Company recognized fair value changes, which include the related interest income of those instruments, in net service revenues and financial income if it is related to Mercado Pago’s operations (please refer to Note 2 – Summary of significant accounting policies - Change in the presentation of certain financial results and reclassification of prior year results) or in interest income and other financial gains if not. Such fair value changes and interest income amount to gains of $224 million and $167 million in net service revenues and financial income, and $40 million and $28 million in interest income and other financial gains for the nine-month periods ended September 30, 2024 and 2023, respectively, and $83 million and $64 million in net service revenues and financial income and $18 million and $17 million in interest income and other financial gains, for the three-month periods ended September 30, 2024 and 2023, respectively.

As of September 30, 2024 and December 31, 2023, the cost of the Company’s investment in corporate debt securities classified as available for sale amounted to $256 million and $30 million, respectively, and the estimated fair value amounted to $261 million and $30 million, respectively. The cost of these securities is determined under a specific identification basis. As of September 30, 2024, the gross unrealized gains accumulated in the interim condensed consolidated statements of comprehensive income amounted to $5 million. As of December 31, 2023 the gross unrealized gains accumulated in the consolidated statements of comprehensive income were less than $1 million. For the nine and three-month periods ended September 30, 2024, the proceeds from sales of corporate debt securities amounted to $12 million and $9 million, respectively. There were no sales of corporate debt securities during the nine and three-month periods ended September 30, 2023.

The following table summarizes the net carrying amount of the corporate debt securities classified as available for sale, classified by its contractual maturities:

	September 30, 2024		December 31, 2023
	(In millions)
One year or less	$	94	$	5
One year to two years	48		12
Two years to three years	24		4
Three years to four years	40		3
Four years to five years	55		6
Total available for sale investments	$	261	$	30

The following table summarizes the net carrying amount of the debt securities not classified as available for sale, classified by its contractual maturities or Management expectation to convert the investments into cash:

	September 30, 2024		December 31, 2023
	(In millions)
One year or less	$	4,333	$	3,668
One year to two years	445		4
Two years to three years	254		—
Three years to four years	297		35
Four years to five years	2		37
More than five years	—		3
Total debt securities not classified as available for sale	$	5,331	$	3,747

Financial assets and liabilities not measured and recorded at fair value

The following table summarizes the estimated fair value of the financial assets and liabilities of the Company not measured at fair value as of September 30, 2024 and December 31, 2023:

	Balances as of September 30, 2024		Estimated fair value as of September 30, 2024		Balances as of December 31, 2023		Estimated fair value as of December 31, 2023
	(In millions)
Cash and cash equivalents	$	1,860	$	1,860	$	1,825	$	1,825
Restricted cash and cash equivalents	923		923		898		898
Investments	84		84		15		15
Accounts receivables, net	216		216		156		156
Credit card receivables and other means of payment, net	4,585		4,585		3,632		3,632
Loans receivable, net	4,404		4,387		2,694		2,676
Other assets	167		167		131		131
Total Assets	$	12,239	$	12,222	$	9,351	$	9,333
Accounts payable and accrued expenses	$	2,940	$	2,940	$	2,117	$	2,117
Funds payable to customers	5,854		5,854		4,475		4,475
Amounts payable due to credit and debit card transactions	1,716		1,716		1,092		1,092
Salaries and social security payable	532		532		441		441
Loans payable and other financial liabilities	5,252		5,186		4,495		4,441
Other liabilities	391		391		285		285
Total Liabilities	$	16,685	$	16,619	$	12,905	$	12,851

As of September 30, 2024 and December 31, 2023, the carrying value of the Company’s financial assets with determinable fair value (except for loans receivable) not measured at fair value approximated their fair value mainly because of their short-term maturity. If these financial assets were measured at fair value in the financial statements, cash and restricted cash would be classified as Level 1 (where cost and fair value are aligned) and the remaining financial assets would be classified as Level 2. The estimated fair value of the loans receivable would be classified as Level 3 based on the Company’s assumptions.

As of September 30, 2024 and December 31, 2023, the carrying value of the Company’s financial liabilities (except for 2026 Sustainability Notes and 2031 Notes) not measured at fair value approximated their fair value mainly because of their short-term maturity or because the effective interest rates are not materially different from market interest rates. If these financial liabilities were measured at fair value in the financial statements, these would be classified as Level 2. As of September 30, 2024 and December 31, 2023, the estimated fair value of the 2026 Sustainability Notes would be $352 million and $375 million, respectively, and the estimated fair value of the 2026 Notes would be $525 million and $599 million, respectively, which is based on Level 2 inputs.