Fair Value Measurements

9 Months Ended

Sep. 30, 2019

The FASB literature regarding fair value measurements for certain assets and liabilities establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of “observable inputs” and minimize the use of “unobservable inputs.” The three levels of inputs used to measure fair value are as follows:


•	Level 1—Quoted prices in active markets for identical assets or liabilities;


•	Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets or other inputs that are observable or can be corroborated by observable market data; and


•	Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.

Fair Value Measurements on a Recurring Basis

The table below segregates all of our financial assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date (amounts in millions):



				Fair Value Measurements at September 30, 2019 Using
	As of September 30, 2019			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Balance Sheet Classification
Financial Assets:
Recurring fair value measurements:
Money market funds	$	4,616		$	4,616	$	—		$	—	Cash and cash equivalents
Foreign government treasury bills	36			36		—			—		Cash and cash equivalents
Foreign currency forward contracts designated as hedges	23			—		23			—		Other current assets
Foreign currency forward contracts not designated as hedges	8			—		8			—		Other current assets
Total recurring fair value measurements	$	4,683		$	4,652	$	31		$	—

Financial Liabilities:
Foreign currency forward contracts not designated as hedges	$	(4	)	$	—	$	(4	)	$	—	Accrued expenses and other liabilities



				Fair Value Measurements at December 31, 2018 Using
	As of December 31, 2018			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Balance Sheet Classification
Financial Assets:
Recurring fair value measurements:
Money market funds	$	3,925		$	3,925	$	—		$	—	Cash and cash equivalents
Foreign government treasury bills	32			32		—			—		Cash and cash equivalents
U.S. treasuries and government agency securities	150			150		—			—		Other current assets
Foreign currency forward contracts designated as hedges	13			—		13			—		Other current assets
Foreign currency forward contracts not designated as hedges	1			—		1			—		Other current assets
Total recurring fair value measurements	$	4,121		$	4,107	$	14		$	—

Financial Liabilities:
Foreign currency forward contracts designated as hedges	$	(1	)	$	—	$	(1	)	$	—	Accrued expenses and other liabilities

Foreign Currency Forward Contracts

Foreign Currency Forward Contracts Designated as Hedges (“Cash Flow Hedges”)

The total gross notional amounts and fair values of our Cash Flow Hedges are as follows (amounts in millions):



	As of September 30, 2019				As of December 31, 2018
	Notional amount		Fair value gain (loss)		Notional amount		Fair value gain (loss)
Foreign Currency:
Buy USD, Sell Euro	$	310	$	23	$	723	$	12

At September 30, 2019, our Cash Flow Hedges have remaining maturities of three months or less. Additionally, $2 million of net realized but unrecognized gains are recorded within “Accumulated other comprehensive income (loss)” at September 30, 2019 for Cash Flow Hedges that had settled but were deferred and will be amortized into earnings, along with the associated hedged revenues. Such amounts will be reclassified into earnings within the next 12 months.

The amount of pre-tax net realized gains (losses) associated with our Cash Flow Hedges that were reclassified out of “Accumulated other comprehensive income (loss)” and into earnings was as follows (amounts in millions):



	For the Three Months Ended September 30,				For the Nine Months Ended September 30,					Statement of Operations Classification
	2019		2018		2019		2018			Statement of Operations Classification
Cash Flow Hedges	$	7	$	3	$	24	$	(11	)	Net revenues

Foreign Currency Forward Contracts Not Designated as Hedges

The gross notional amounts and fair values of our foreign currency forward contracts not designated as hedges are as follows (amounts in millions):



	As of September 30, 2019					As of December 31, 2018
	Notional amount		Fair value gain (loss)			Notional amount		Fair value gain (loss)
Foreign Currency:
Buy USD, Sell EUR	$	81	$	5		$	—	$	—
Buy EUR, Sell USD	79		(3		)	—		—
Buy USD, Sell SEK	46		2			—		—
Buy SEK, Sell USD	45		(1		)	—		—
Buy USD, Sell GBP	13		1			55		1
Buy GBP, Sell USD	13		—			—		—

For the three and nine months ended September 30, 2019 and 2018, pre-tax net gains (losses) associated with these forward contracts were recorded in “General and administrative expenses” and were not material.

Fair Value Measurements on a Non-Recurring Basis

We measure the fair value of certain assets on a non-recurring basis, generally annually or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

During the three months ended June 30, 2019, we recorded an upward adjustment of $38 million to an investment in equity securities, which has been historically recorded at cost, based on an observable and orderly transaction in the common stock of the investee. We recognized a corresponding unrealized gain within “Interest and other expense (income), net” in our condensed consolidated statement of operations. As of September 30, 2019, the carrying value of the investment is $42 million and is recorded in “Other assets” on our condensed consolidated balance sheet. We classify this investment as Level 3 in the fair value hierarchy as we estimated the value based on valuation methods using the observable transaction price in a market with limited activity.

For the three and nine months ended September 30, 2019 and 2018, there were no impairment charges related to assets that are measured on a non-recurring basis.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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