NOTE 5: FINANCIAL INSTRUMENTS

Cash, Cash Equivalents and Marketable Securities

The following tables show our cash and available-for-sale securities’ amortized cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category recorded as cash and cash equivalents or short and long-term marketable securities as of the dates presented (in millions):

	June 30, 2017
									Cash and		Short-Term		Long-Term
	Amortized		Unrealized		Unrealized		Fair		Cash		Marketable		Marketable
	Cost		Gains		Losses		Value		Equivalents		Securities		Securities
Cash	$	885	$	-	$	-	$	885	$	885	$	-	$	-
Level 1:
Money market funds		1		-		-		1		1		-		-
Level 2:
U.S. agency securities		3		-		-		3		-		2		1
U.S. treasury securities		2		-		-		2		-		2		-
Certificates of deposit		1		-		-		1		-		1		-
Commercial paper		1		-		-		1		1		-		-
Corporate debt securities		15		-		-		15		-		12		3
Subtotal		22		-		-		22		1		17		4
Total	$	908	$	-	$	-	$	908	$	887	$	17	$	4

	December 31, 2016
									Cash and		Short-Term		Long-Term
	Amortized		Unrealized		Unrealized		Fair		Cash		Marketable		Marketable
	Cost		Gains		Losses		Value		Equivalents		Securities		Securities
Cash	$	595	$	-	$	-	$	595	$	595	$	-	$	-
Level 1:
Money market funds		17		-		-		17		17		-		-
Level 2:
U.S. agency securities		23		-		-		23		-		21		2
U.S. treasury securities		8		-		-		8		-		8		-
Certificates of deposit		16		-		-		16		-		15		1
Commercial paper		5		-		-		5		-		5		-
Corporate debt securities		82		-		-		82		-		69		13
Subtotal		134		-		-		134		-		118		16
Total	$	746	$	-	$	-	$	746	$	612	$	118	$	16

Our cash and cash equivalents consist of cash on hand in global financial institutions, money market funds and marketable securities with maturities of 90 days or less at the date purchased. The remaining maturities of our long-term marketable securities range from one to three years and our short-term marketable securities include maturities that were greater than 90 days at the date purchased and have 12 months or less remaining at June 30, 2017 and December 31, 2016, respectively.

We classify our cash equivalents and marketable securities within Level 1 and Level 2 as we value our cash equivalents and marketable securities using quoted market prices (Level 1) or alternative pricing sources (Level 2). The valuation technique we used to measure the fair value of money market funds were derived from quoted prices in active markets for identical assets or liabilities. Fair values for Level 2 investments are considered “Level 2” valuations because they are obtained from independent pricing sources for identical or comparable instruments, rather than direct observations of quoted prices in active markets. Our procedures include controls to ensure that appropriate fair values are recorded, including comparing the fair values obtained from our independent pricing services against fair values obtained from another independent source.

There were no material realized gains or losses related to sales of our marketable securities for the three and six months ended June 30, 2017 and 2016, respectively. Realized gains and losses on the sale of securities were determined by specific identification of each security’s cost basis. We consider any individual investments in an unrealized loss position to be temporary in nature and do not consider any of our investments other-than-temporarily impaired as of June 30, 2017.

Derivative Financial Instruments

In certain circumstances, we enter into foreign currency forward exchange contracts, or forward contracts, to reduce the effects of fluctuating foreign currency exchange rates on our cash flows denominated in foreign currencies. We do not use derivatives for trading or speculative purposes.

Our current forward contracts are not designated as hedges and have current maturities of less than 90 days. Consequently, any gain or loss resulting from the change in fair value was recognized in our unaudited condensed consolidated statement of operations. The net gain or loss related to our settled and outstanding forward contracts for the three and six months ended June 30, 2017 were not material. We recorded a net gain of $2 million and $1 million for the three and six months ended June 30, 2016, respectively, related to our settled and outstanding forward contracts in “Interest income and other, net” on our unaudited condensed consolidated statements of operations.

The following table shows the notional principal amounts of our outstanding derivative instruments that are not designated as hedging instruments as of the dates presented:

	June 30, 2017		December 31, 2016
	(in millions)
Foreign exchange-forward contracts (1), (2)	$	5	$	6

(1)

Derivative contracts address foreign currency exchange fluctuations for the Euro versus the U.S. Dollar. The Company was entered into one and two outstanding derivative contracts as of June 30, 2017 and December 31, 2016, respectively.

(2)

The fair value of our derivatives was not material as of June 30, 2017 and December 31, 2016, respectively. We measure the fair value of our outstanding or unsettled derivatives using Level 2 fair value inputs, as we use a pricing model that takes into account the contract terms as well as current foreign currency exchange rates in active markets.

Counterparties to our foreign currency exchange derivatives consist of major international financial institutions. We monitor our positions and the credit ratings of the counterparties involved and, by policy limits, the amount of credit exposure to any one party. While we may be exposed to potential losses due to the credit risk of non-performance by these counterparties, losses are not anticipated and any credit risk amounts associated with our outstanding or unsettled derivative instruments are deemed to be not material for any period presented.

Other Financial Instruments

Other financial instruments not measured at fair value on a recurring basis include accounts receivable, accounts payable, deferred merchant payables, short-term debt, accrued and other current liabilities and long-term debt. With the exception of long-term debt, the carrying amount approximates fair value because of the short maturity of these instruments as reported on our unaudited condensed consolidated balance sheets as of June 30, 2017 and December 31, 2016, respectively. The carrying value of the long-term debt from our 2015 Credit Facility bears interest at a variable rate and therefore is also considered to approximate fair value.

We also hold investments in equity securities of privately-held companies of approximately $14 million at June 30, 2017 and December 31, 2016, respectively. These investments are accounted for under the cost method and included in "Other long-term assets" in the Company's unaudited condensed consolidated balance sheet. Under the cost method, investments are carried at cost and are adjusted only for other-than-temporary declines in fair value, certain distributions, and additional investments.

We did not have any Level 3 assets or liabilities at June 30, 2017 and December 31, 2016.