Fair Value Measurements

We measure our cash equivalents, investments and foreign exchange forward contracts at fair value. The authoritative guidance defines fair value as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The authoritative guidance also establishes a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions.

The fair value hierarchy consists of the following three levels:


•	Level 1 – Inputs are quoted prices in active markets for identical assets or liabilities.


•	Level 2 – Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data.


•	Level 3 – Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

The following table summarizes our financial assets and (liabilities) measured at fair value on a recurring basis as of September 30, 2014:



	Level 1		Level 2			Level 3		Total
Cash equivalents:
Money market funds	$	1,141,034	$	—		$	—	$	1,141,034
Time deposits	—		50,054			—		50,054
Total cash equivalents	1,141,034		50,054			—		1,191,088
Short-term investments:
Time deposits	—		488,188			—		488,188
Available-for-sale investment securities:
U.S. Treasury and agency debt securities	527,186		151,607			—		678,793
Corporate and other debt securities			400,634			—		400,634
Certificates of deposit and commercial paper	—		68,971			—		68,971
Asset-backed securities			228,019			—		228,019
Municipal debt securities			114,514			—		114,514
Mutual funds	—		21,741			—		21,741
Total available-for-sale investment securities	527,186		985,486			—		1,512,672
Total short-term investments	527,186		1,473,674			—		2,000,860
Derivative financial instruments - foreign exchange forward contracts:
Other current assets	—		2,717			—		2,717
Accrued expenses and other current liabilities	—		(105,408		)	—		(105,408		)
Other noncurrent assets	—		234			—		234
Other noncurrent liabilities	—		(33,330		)	—		(33,330		)
Total	$	1,668,220	$	1,387,941		$	—	$	3,056,161

The following table summarizes our financial assets and (liabilities) measured at fair value on a recurring basis as of December 31, 2013:



	Level 1		Level 2			Level 3		Total
Cash equivalents:
Money market funds	$	694,416	$	—		$	—	$	694,416
Time deposits	—		128,654			—		128,654
Commercial paper	—		22,000			—		22,000
Total cash equivalents	694,416		150,654			—		845,070
Short-term investments:
Time deposits	—		329,783			—		329,783
Available-for-sale investment securities:
U.S. Treasury and agency debt securities	423,051		83,234			—		506,285
Corporate and other debt securities	—		301,841			—		301,841
Certificates of deposit and commercial paper	—		99,959			—		99,959
Asset-backed securities	—		160,267			—		160,267
Municipal debt securities	—		115,196			—		115,196
Mutual funds	—		21,136			—		21,136
Total available-for-sale investment securities	423,051		781,633			—		1,204,684
Total short-term investments	423,051		1,111,416			—		1,534,467
Derivative financial instruments - foreign exchange forward contracts:
Other current assets	—		11,105			—		11,105
Accrued expenses and other current liabilities	—		(191,584		)	—		(191,584		)
Other noncurrent liabilities	—		(164,490		)	—		(164,490		)
Total	$	1,117,467	$	917,101		$	—	$	2,034,568

We measure the fair value of money market funds and U.S. Treasury securities based on quoted prices in active markets for identical assets. The fair value of commercial paper, certificates of deposit, U.S. government agency securities, municipal debt securities, U.S. and international corporate bonds and foreign government debt securities is measured based on relevant trade data, dealer quotes, or model driven valuations using significant inputs derived from or corroborated by observable market data, such as yield curves and credit spreads. We measure the fair value of our asset-backed securities using model driven valuations based on significant inputs derived from or corroborated by observable market data such as dealer quotes, available trade information, spread data, current market assumptions on prepayment speeds and defaults and historical data on deal collateral performance. The value of the mutual funds invested in fixed income securities is based on the net asset value, or NAV, of the fund, with appropriate consideration of the liquidity and any restrictions on disposition of our investment in the fund.

We estimate the fair value of each foreign exchange forward contract by using a present value of expected cash flows model. This model calculates the difference between the current market forward price and the contracted forward price for each foreign exchange contract and applies the difference in the rates to each outstanding contract. The market forward rates include a discount and credit risk factor. The amounts are aggregated by type of contract and maturity.

During the nine months ended September 30, 2014 and the year ended December 31, 2013, there were no transfers among Level 1, Level 2, or Level 3 financial assets and liabilities.