NOTE 6: FINANCIAL INSTRUMENTS

Cash, Cash Equivalents, Restricted Cash and Marketable Securities

The following tables show our cash, cash equivalents, restricted cash and short-term and long-term available-for-sale marketable debt securities, by major security type, that are measured at fair value on a recurring basis and were categorized using the fair value hierarchy, as well as their classification on our unaudited condensed consolidated balance sheets, as of the periods presented (in millions):

	September 30, 2018
	Amortized Cost		Fair Value (2)		Cash, Cash Equivalents and Restricted Cash		Short-Term Marketable Securities		Long-Term Marketable Securities (3)
Cash and restricted cash (1)	$	421	$	421	$	421	$	-	$	-
Level 1:
Money market funds		242		242		242		-		-
Total	$	663	$	663	$	663	$	-	$	-

	December 31, 2017
	Amortized Cost		Fair Value (2)		Cash, Cash Equivalents and Restricted Cash		Short-Term Marketable Securities		Long-Term Marketable Securities (3)
Cash and restricted cash (1)	$	663	$	663	$	663	$	-	$	-
Level 1:
Money market funds		1		1		1		-		-
Level 2:
U.S. agency securities		11		11		-		6		5
U.S. treasury securities		1		1		-		1		-
Certificates of deposit		2		2		-		2		-
Commercial paper		11		11		9		2		-
Corporate debt securities		46		46		-		24		22
Subtotal		71		71		9		35		27
Total	$	735	$	735	$	673	$	35	$	27

(1)	As of September 30, 2018 and December 31, 2017, our restricted cash, which primarily consists of escrowed security deposits, was not material and is included in other long-term assets on our unaudited condensed consolidated balance sheets.

(2)	As of September 30, 2018 and December 31, 2017, any unrealized gains or losses related to our marketable securities were not material.

(3)	Long-term marketable securities are included in other long-term assets on our unaudited condensed consolidated balance sheets.

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 of purchase. 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 September 30, 2018 and December 31, 2017, respectively.

For assets and liabilities required to be reported at fair value, GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels:

Level 1—Valuations are based on quoted market prices for identical assets and liabilities in active markets.

Level 2—Valuations are based on observable inputs other than quoted market prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Valuations are based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

We classify our cash, cash equivalents, restricted cash and marketable securities within Level 1 and Level 2 as we value these financial instruments 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 was derived from quoted prices in active markets for identical assets or liabilities. Fair values for Level 2 marketable securities 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 nine months ended September 30, 2018 and 2017, respectively. Realized gains and losses on the sale of securities are determined by specific identification of each security’s cost basis. We consider any unrealized loss position in our available-for-sale marketable debt securities to be temporary in nature and do not consider any of these investments other-than-temporarily impaired as of September 30, 2018 and December 31, 2017.

Derivative Financial Instruments

We use foreign currency forward contracts to reduce the effects of foreign currency exchange rate fluctuations on our cash flows primarily for the Euro versus the U.S. Dollar. We do not use derivatives for trading or speculative purposes. Counterparties to 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. Our foreign currency forward contracts, which we have entered into to date, have not been designated as hedges and typically have had current maturities of less than 90 days.

Derivative financial instruments are carried at fair value on our unaudited condensed consolidated balance sheets. Any gain or loss resulting from the change in fair value of the foreign currency forward contracts has been recognized in our unaudited condensed consolidated statement of operations in “Interest income and other, net.” All gains and losses for the three months ended September 30, 2018 were not material. We recorded a net loss of $3 million for the nine months ended September 30, 2018, related to our settled forward contracts in our unaudited condensed consolidated statement of operations in “Interest income and other, net.” All gains and losses for both the three and nine months ended September 30, 2017, respectively, were not material. The Company had no outstanding foreign currency forward contracts as of September 30, 2018 and December 31, 2017, respectively.

Other Financial Instruments

Other financial instruments not measured at fair value on a recurring basis include accounts receivable and contract assets, accounts payable, deferred merchant payables, short-term debt, accrued expenses and other current liabilities and long-term debt. The carrying amount of these financial instruments, with the exception of long-term debt, approximate their fair value because of the short maturity of these instruments as reported on our unaudited condensed consolidated balance sheets as of September 30, 2018 and December 31, 2017. 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 its fair value.

In addition, we hold investments in equity securities of privately-held companies that do not have a readily determinable fair value. As of both September 30, 2018 and December 31, 2017, the total carrying value of our equity investments in these privately-held companies were $12 million and are included in “Other long-term assets” on our unaudited condensed consolidated balance sheets. Our policy is to measure these investments at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. On a quarterly basis, we perform a qualitative assessment considering impairment indicators to evaluate whether these investments are impaired and also monitor for any observable price changes. During the three and nine months ended September 30, 2018, we did not have any impairment loss on these equity investments. The Company recognized a loss of $2 million related to an investment in a privately-held company during the three and nine months ended September 30, 2017 in “Interest income and other, net” on our unaudited condensed consolidated statements of operations.

The Company did not have any material assets or liabilities measured at fair value on a recurring basis using the Level 3 unobservable inputs at both September 30, 2018 and December 31, 2017.