Fair Value Measurement

9 Months Ended

Oct. 31, 2020

The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1. Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2. Significant other inputs that are directly or indirectly observable in the marketplace.

Level 3. Significant unobservable inputs which are supported by little or no market activity.

All of the Company’s cash equivalents, marketable securities and foreign currency derivative contracts are classified within Level 1 or Level 2 because the Company’s cash equivalents, marketable securities and foreign currency derivative contracts are valued using quoted market prices or alternative pricing sources and models utilizing observable market inputs.

The following table presents information about the Company’s assets and liabilities that are measured at fair value as of October 31, 2020 and indicates the fair value hierarchy of the valuation (in millions):


Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of October 31, 2020
Cash equivalents (1):
Time deposits	$	0	$	1,055	$	0	$	1,055
Money market mutual funds	1,120		0		0		1,120

Marketable securities:
Corporate notes and obligations	0		3,253		0		3,253
U.S. treasury securities	0		164		0		164
Mortgage backed obligations	0		407		0		407
Asset backed securities	0		1,143		0		1,143
Municipal securities	0		313		0		313
Foreign government obligations	0		89		0		89
U.S. agency obligations	0		101		0		101


Covered bonds	0		298		0		298
Strategic investments:
Publicly held equity securities	2,261		0		0		2,261

Foreign currency derivative contracts (2)	0		24		0		24
Total assets	$	3,381	$	6,847	$	0	$	10,228
Liabilities:
Foreign currency derivative contracts (3)	0		41		0		41
Total liabilities	$	0	$	41	$	0	$	41

___________

(1) Included in “cash and cash equivalents” in the accompanying condensed consolidated balance sheet as of October 31, 2020, in addition to $1.5 billion of cash.

(2) Included in “prepaid expenses and other current assets” in the accompanying condensed consolidated balance sheet as of October 31, 2020.

(3) Included in “accounts payable, accrued expenses and other liabilities” in the accompanying condensed consolidated balance sheet as of October 31, 2020.

The following table presents information about the Company’s assets and liabilities that are measured at fair value as of January 31, 2020 and indicates the fair value hierarchy of the valuation (in millions):


Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of January 31, 2020
Cash equivalents (1):
Time deposits	$	0	$	746	$	0	$	746
Money market mutual funds	1,293		0		0		1,293

Marketable securities:
Corporate notes and obligations	0		2,207		0		2,207
U.S. treasury securities	0		183		0		183
Mortgage backed obligations	0		226		0		226
Asset backed securities	0		781		0		781
Municipal securities	0		158		0		158
Foreign government obligations	0		69		0		69
U.S. agency obligations	0		12		0		12
Time deposits	0		1		0		1
Covered bonds	0		165		0		165
Strategic investments:
Publicly held equity securities	370		0		0		370

Foreign currency derivative contracts (2)	0		28		0		28
Total assets	$	1,663	$	4,576	$	0	$	6,239
Liabilities:
Foreign currency derivative contracts (3)	0		24		0		24
Total liabilities	$	0	$	24	$	0	$	24

______________

(1) Included in “cash and cash equivalents” in the accompanying condensed consolidated balance sheet in addition to $2.1 billion of cash.

(2) Included in “prepaid expenses and other current assets” in the accompanying condensed consolidated balance sheet.

(3) Included in “accounts payable, accrued expenses and other liabilities” in the accompanying condensed consolidated balance sheet.

Strategic investments measured and recorded at fair value on a non-recurring basis

The Company's privately held debt and equity securities and equity method investments are recorded at fair value on a non-recurring basis. The estimation of fair value for these investments requires the use of significant unobservable inputs, and as a result, the Company classifies these assets as Level 3 within the fair value hierarchy. For example, the Company's privately held equity securities that have been remeasured are classified within Level 3 in the fair value hierarchy because the value is based on valuation methods using the observable transaction price and other unobservable inputs including the volatility, rights, and obligations of the securities the Company holds. The Company's privately held debt and equity securities and equity method investments amounted to $1.7 billion as of October 31, 2020 and $1.6 billion as of January 31, 2020.

- 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