Fair Value Measurements

3 Months Ended

Mar. 31, 2013

Fair Value Measurements

Note 3 – Fair Value Measurements

Financial assets measured at fair value on a recurring basis as of March 31, 2013 are classified using the fair value hierarchy in the table below:

	Total		Level 1		Level 2
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	228,346	$	228,346	$	—
Time deposits		155,764		—		155,764
Restricted cash:
Time deposits		9,887		—		9,887
Derivatives:
Foreign currency forward contracts		3,542		—		3,542
Investments:
Time deposits		874,463		—		874,463
Corporate debt securities		239,479		—		239,479
Total assets	$	1,511,481	$	228,346	$	1,283,135

Financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2012 are classified using the fair value hierarchy in the table below:

	Total		Level 1		Level 2
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	677,523	$	677,523	$	—
Time deposits		89,084		—		89,084
Restricted cash:
Time deposits		9,855		—		9,855
Investments:
Time deposits		525,533		—		525,533
Corporate debt securities		245,477		—		245,477
Total assets	$	1,547,472	$	677,523	$	869,949
Liabilities
Derivatives:
Foreign currency forward contracts	$	3,290	$	—	$	3,290

We classify our cash equivalents and investments within Level 1 and Level 2 as we value our cash equivalents and investments using quoted market prices or alternative pricing sources and models utilizing market observable inputs. Valuation of the foreign currency forward contracts is based on foreign currency exchange rates in active markets, a Level 2 input.

As of March 31, 2013 and December 31, 2012, our cash and cash equivalents consisted primarily of prime institutional money market funds with maturities of 90 days or less, time deposits as well as bank account balances.

We invest in investment grade corporate debt securities all of which are classified as available for sale. As of March 31, 2013, we had $132 million of short-term and $108 million of long-term available for sale investments and the amortized cost basis of the investments approximated their fair value with gross unrealized gains of $2 million and gross unrealized losses of less than $1 million. As of December 31, 2012, we had $119 million of short-term and $126 million of long-term available for sale investments and the amortized cost basis of these investments approximated their fair value with gross unrealized gains of $2 million and gross unrealized losses of less than $1 million.

We also hold time deposit investments with financial institutions. Time deposits with original maturities of less than 90 days are classified as cash equivalents and those with remaining maturities of less than one year are classified as short-term investments. Additionally, we have time deposits classified as restricted cash to fulfill the requirement of an aviation authority of a certain foreign country to protect against the potential non-delivery of travel services in that country. Of the total time deposit investments, $278 million and $274 million as of March 31, 2013 and December 31, 2012 related to balances held by our majority-owned subsidiaries.

Derivative instruments are carried at fair value on our consolidated balance sheets. We use foreign currency forward contracts to economically hedge certain merchant revenue exposures and in lieu of holding certain foreign currency cash for the purpose of economically hedging our foreign currency-denominated operating liabilities. Our goal in managing our foreign exchange risk is to reduce, to the extent practicable, our potential exposure to the changes that exchange rates might have on our earnings, cash flows and financial position. Our foreign currency forward contracts are typically short-term and, as they do not qualify for hedge accounting treatment, we classify the changes in their fair value in other, net. As of March 31, 2013, we were party to outstanding forward contracts hedging our liability and revenue exposures with a total net notional value of $458 million. We had a net forward asset of $4 million as of March 31, 2013 recorded in prepaid expenses and other current assets and a net forward liability of $3 million as of December 31, 2012 recorded in accrued expenses and other current liabilities. We recorded $13 million and $1 million in net gains from foreign currency forward contracts during the three months ended March 31, 2013 and 2012.