4. Restricted Marketable Securities

9 Months Ended

Sep. 30, 2020

Debt Securities, Available-for-sale, Restricted [Abstract]

Restricted marketable securities

4. Restricted Marketable Securities

Restricted marketable securities consisted of the following as of September 30, 2020 and December 31, 2019 (in thousands):

	September 30, 2020		December 31, 2019
Foreign government obligations	$	141,728	$	126,066
U.S. government obligations	119,779		97,719
Total restricted marketable securities	$	261,507	$	223,785

Our restricted marketable securities represent long-term marketable securities held in custodial accounts to fund the estimated future costs of collecting and recycling modules covered under our solar module collection and recycling program. As of September 30, 2020 and December 31, 2019, such custodial accounts also included noncurrent restricted cash balances of $0.7 million and less than $0.1 million, respectively, which were reported within “Other assets.” As necessary, we fund any incremental amounts for our estimated collection and recycling obligations on an annual basis based on the estimated costs of collecting and recycling covered modules, estimated rates of return on our restricted marketable securities, and an estimated solar module life of 25 years, less amounts already funded in prior years. To ensure that amounts previously funded will be available in the future regardless of potential adverse changes in our financial condition (even in the case of our own insolvency), we have established a trust under which estimated funds are put into custodial accounts with an established and reputable bank, for which First Solar, Inc.; First Solar Malaysia Sdn. Bhd.; and First Solar Manufacturing GmbH are grantors. Trust funds may be disbursed for qualified module collection and recycling costs (including capital and facility related recycling costs), payments to customers for assuming collection and recycling obligations, and reimbursements of any overfunded amounts. Investments in the trust must meet certain investment quality criteria comparable to highly rated government or agency bonds.

During the nine months ended September 30, 2020, we sold certain restricted marketable securities for proceeds of $115.2 million, realized gains of $15.1 million on such sales, and repurchased $114.5 million of restricted marketable securities as part of our ongoing management of the custodial accounts. During the nine months ended September 30, 2019, we sold certain restricted marketable securities for proceeds of $47.9 million and realized gains of $15.0 million on such sales as part of efforts to align the currencies of the investments with those of the corresponding collection and recycling liabilities and disbursed $14.9 million of overfunded amounts. See Note 8. “Fair Value Measurements” to our condensed consolidated financial statements for information about the fair value of our restricted marketable securities.

The following tables summarize the unrealized gains and losses related to our restricted marketable securities, by major security type, as of September 30, 2020 and December 31, 2019 (in thousands):

	As of September 30, 2020
	Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for Credit Losses		Fair Value
Foreign government obligations	$	130,002	$	11,726	$	—	$	—	$	141,728
U.S. government obligations	115,349		4,430		—		—		119,779
Total	$	245,351	$	16,156	$	—	$	—	$	261,507

	As of December 31, 2019
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Foreign government obligations	$	129,499	$	—	$	3,433	$	126,066
U.S. government obligations	99,700		—		1,981		97,719
Total	$	229,199	$	—	$	5,414	$	223,785

The following table presents the change in the allowance for credit losses related to our restricted marketable securities for the nine months ended September 30, 2020 (in thousands):

	Restricted Marketable Securities
Balance as of December 31, 2019	$	—
Cumulative-effect adjustment for the adoption of ASU 2016-13	54
Provision for credit losses, net	(29)
Sales of restricted marketable securities	(25)
Balance as of September 30, 2020	$	—

As of September 30, 2020, the contractual maturities of our restricted marketable securities were between 9 years and 21 years.