FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2023

There are three levels of inputs to valuation techniques used to measure fair value:

Level 1: Quoted prices in active markets that are accessible by the Company at the measurement date for identical assets and liabilities.

Level 2: Inputs that are observable, either directly or indirectly. Such prices may be based upon quoted prices for identical or comparable securities in active markets or inputs not quoted on active markets, but corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available.

Financial assets and liabilities measured at fair value on a recurring basis at June 30, 2023 and nonrecurring fair value measurements are classified in the categories described in the table below (in millions):


	Level 1		Level 2		Level 3		Total

Recurring fair value measurements
ASSETS:
Cash equivalents and restricted cash equivalents:
Money market fund investments	$	13,597	$	—	$	—	$	13,597




Certificates of deposit	29		—		—		29
Short-term investments:
International government securities	—		66		—		66
U.S. government securities	—		215		—		215
Corporate debt securities	—		359		—		359



Long-term investments:
International government securities	—		9		—		9
U.S. government securities	—		3		—		3
Corporate debt securities	—		24		—		24

Equity securities	275		—		—		275
Derivatives:
Foreign currency exchange derivatives	—		49		—		49
Total assets at fair value	$	13,901	$	725	$	—	$	14,626

LIABILITIES:
Foreign currency exchange derivatives	$	—	$	84	$	—	$	84

Nonrecurring fair value measurements
Investment in equity securities of a private company (1)	$	—	$	—	$	98	$	98

(1) As of June 30, 2023, the investment in Yanolja was written down to its estimated fair value (see Note 5).

Financial assets and liabilities measured at fair value on a recurring basis at December 31, 2022 and nonrecurring fair value measurements are classified in the categories described in the table below (in millions):


	Level 1		Level 2		Level 3		Total
Recurring fair value measurements

ASSETS:
Cash equivalents and restricted cash equivalents:
Money market fund investments	$	11,483	$	—	$	—	$	11,483




Certificates of deposit	60		—		—		60
Short-term investments:
International government securities	—		13		—		13
U.S. government securities	—		130		—		130
Corporate debt securities	—		32		—		32



Long-term investments:
International government securities	—		62		—		62
U.S. government securities	—		144		—		144
Corporate debt securities	—		359		—		359

Equity securities	2,071		—		—		2,071
Derivatives:
Foreign currency exchange derivatives	—		65		—		65
Total assets at fair value	$	13,614	$	805	$	—	$	14,419

LIABILITIES:
Foreign currency exchange derivatives	$	—	$	26	$	—	$	26


Nonrecurring fair value measurements
Investment in equity securities of a private company (1)	$	—	$	—	$	122	$	122

(1) During the year ended December 31, 2022, the investment in Yanolja was written down to its estimated fair value.

Investments

See Note 5 for additional information related to the Company's investments.

Investments in private companies measured using Level 3 inputs

The Company's investments measured using Level 3 inputs primarily consist of investments in privately-held companies that are classified as equity securities without readily determinable fair values. Fair values of privately held securities are estimated using a variety of valuation methodologies, including both the market and income approaches. The Company uses valuation techniques appropriate for the type of investment and the information available about the investee as of the valuation date to determine fair value. While observable financing transactions of the investee are generally considered the best indication of the enterprise value, considering factors such as the proximity in timing of the financing transaction to the valuation date, the Company may also use the calibration process and other valuation techniques to supplement this data, including the income approach. Calibration is the process of using observed transactions in the investee company's own instruments to ensure that the valuation techniques that will be employed to value the investment on subsequent measurement dates begin with assumptions that are consistent with the observed transactions.

As of June 30, 2023 and 2022, the Company evaluated its investment in Yanolja for impairment using a combination of the market approach and the income approach in estimating the fair value of the investment as of those dates, and recognized impairment charges. The market approach estimates value using prices and other relevant information generated by market transactions involving comparable companies. The income approach estimates value based on the expectation of future cash flows that a company will generate. These future cash flows are discounted to their present values using a discount rate based on a company’s weighted-average cost of capital adjusted to reflect the risks inherent in its cash flows. The key unobservable inputs and ranges used for the June 2023 impairment evaluation, primarily using the income approach, include the weighted average cost of capital (10.5%-14.5%) and the terminal EBITDA multiple (14x-16x). The key unobservable inputs and ranges used for the June 2022 impairment evaluation include, for the market approach, percentage decrease in the calibrated EBITDA multiple (36%) and for the income approach, the weighted average cost of capital (10%-14%) and the terminal EBITDA multiple (14x-16x). Significant changes in any of these inputs in isolation would result in significantly different fair value measurements. A change in the assumption used for EBITDA multiples would result in a directionally similar change in the fair

value, and a change in the assumption used for weighted average cost of capital would result in a directionally opposite change in the fair value.

The determination of the fair values of investments, where the Company is a minority shareholder and has access to limited information from the investee, reflects numerous assumptions that are subject to various risks and uncertainties, including key assumptions regarding the investee’s expected growth rates and operating margin, as well as other key assumptions with respect to matters outside of the Company's control, such as discount rates and market comparables. It requires significant judgments and estimates and actual results could be materially different than those judgments and estimates utilized in the fair value estimate. Future events and changing market conditions may lead the Company to re-evaluate the assumptions reflected in the valuation which may result in a need to recognize additional impairment charges.

Derivatives

The Company reports the fair values of its derivative assets and liabilities on a gross basis in the Consolidated Balance Sheets in "Other current assets" and "Accrued expenses and other current liabilities," respectively. As of June 30, 2023 and December 31, 2022, the Company did not designate any derivatives as hedges for accounting purposes.

The table below provides estimated fair values and notional amounts of foreign currency exchange derivatives outstanding at June 30, 2023 and December 31, 2022 (in millions). The notional amount of a foreign currency forward contract is the contracted amount of foreign currency to be exchanged and is not recorded in the balance sheets.


	June 30, 2023		December 31, 2022
Estimated fair value of derivative assets	$	49	$	65
Estimated fair value of derivative liabilities	$	84	$	26

Notional amount:
Foreign currency purchases	$	4,320	$	2,870
Foreign currency sales	$	4,588	$	2,682

The effect of foreign currency exchange derivatives recorded in "Other income (expense), net" in the Unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022 is as follows (in millions):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Losses on foreign currency exchange derivatives	$	67	$	40	$	84	$	56

Other Financial Assets and Liabilities

At June 30, 2023 and December 31, 2022, the Company's cash consisted of bank deposits. Cash equivalents principally include money market fund investments and certificates of deposit and their carrying value generally approximates the fair value as they are readily convertible to known amounts of cash. Other financial assets and liabilities, including restricted cash, accounts payable, accrued expenses, and deferred merchant bookings, are carried at cost which approximates their fair values because of the short-term nature of these items. Accounts receivable and other financial assets measured at amortized cost are carried at cost less an allowance for expected credit losses to present the net amount expected to be collected (see Note 7). See Note 9 for the estimated fair value of the Company's outstanding senior notes, including the estimated fair value of the Company's convertible senior notes.

- 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.

+ References + Details