Fair Value Measurement of Assets and Liabilities

3 Months Ended

Mar. 31, 2014

Fair Value Disclosures [Abstract]

Fair Value Measurement of Assets and Liabilities

Fair Value Measurement of Assets and Liabilities

The following tables summarize our financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2014 and December 31, 2013:

Description	Balance as of March 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
	(In millions)
Assets:
Cash and cash equivalents	$	4,415	$	4,355	$	60
Short-term investments:
Restricted cash	19		19		—
Corporate debt securities	2,620		—		2,620
Government and agency securities	9		—		9
Equity instruments	781		781		—
Total short-term investments	3,429		800		2,629
Funds receivable and customer accounts	3,458		—		3,458
Derivatives	21		—		21
Long-term investments:
Corporate debt securities	4,611		—		4,611
Government and agency securities	237		—		237
Total long-term investments	4,848		—		4,848
Total financial assets	$	16,171	$	5,155	$	11,016
Liabilities:
Derivatives	$	119	$	—	$	119

Description	Balance as of December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
	(In millions)
Assets:
Cash and cash equivalents	$	4,494	$	4,159	$	335
Short-term investments:
Restricted cash	17		17		—
Corporate debt securities	3,529		—		3,529
Government and agency securities	43		—		43
Time deposits	49		—		49
Equity instruments	893		893		—
Total short-term investments	4,531		910		3,621
Funds receivable and customer accounts	3,563		—		3,563
Derivatives	44		—		44
Long-term investments:
Corporate debt securities	4,445		—		4,445
Government and agency securities	251		—		251
Total long-term investments	4,696		—		4,696
Total financial assets	$	17,328	$	5,069	$	12,259
Liabilities:
Derivatives	$	151	$	—	$	151

Our financial assets and liabilities are valued using market prices on both active markets (level 1) and less active markets (level 2). Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 instrument valuations are obtained from readily available pricing sources for comparable instruments, identical instruments in less active markets, or models using market observable inputs. The majority of our derivative instruments are valued using pricing models that take into account the contract terms as well as multiple inputs where applicable, such as equity prices, interest rate yield curves, option volatility and currency rates. Our derivative instruments are primarily short-term in nature, generally one month to one year in duration. Certain foreign currency contracts designated as cash flow hedges may have a duration of up to 18 months. We did not have any transfers of financial instruments between valuation levels during the first three months of 2014.

Cash and cash equivalents are short-term, highly liquid investments with original or remaining maturities of three months or less when purchased and are comprised primarily of bank deposits, money market funds and commercial paper. We had total funds receivable and customer accounts of $9.6 billion as of March 31, 2014, of which $3.5 billion was invested in short-term investments.

In addition, we had cost and equity method investments of approximately $357 million and $269 million included in long-term investments on our condensed consolidated balance sheet at March 31, 2014 and our consolidated balance sheet at December 31, 2013, respectively. Additionally, as of both March 31, 2014 and December 31, 2013, we also held $6 million of time deposits classified as held to maturity, which are recorded at amortized cost.

As of March 31, 2014 and December 31, 2013, we held no direct investments in auction rate securities, collateralized debt obligations, structured investment vehicles or mortgage-backed securities.

Other financial instruments, including accounts receivable, loans and interest receivable, accounts payable, funds receivable, certain customer accounts, funds payable and amounts due to customers, are carried at cost, which approximates their fair value because of the short-term nature of these instruments.