Note 4 – Fair Value Measurements

Financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2017 are classified using the fair value hierarchy in the table below:



	Total		Level 1		Level 2
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	90,863	$	90,863	$	—
Time deposits	741,682		—		741,682
Restricted cash:
Time deposits	2,362		—		2,362
Investments:
Time deposits	857,285		—		857,285
Corporate debt securities	55,754		—		55,754
Total assets	$	1,747,946	$	90,863	$	1,657,083

Liabilities
Derivatives:
Foreign currency forward contracts	$	2,532	$	—	$	2,532

Financial assets measured at fair value on a recurring basis as of December 31, 2016 are classified using the fair value hierarchy in the table below:



	Total		Level 1		Level 2
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	113,955	$	113,955	$	—
Time deposits	299,585		—		299,585
Investments:
Time deposits	24,576		—		24,576
Corporate debt securities	64,227		—		64,227
Total assets	$	502,343	$	113,955	$	388,388

Liabilities
Derivatives:
Foreign currency forward contracts	$	4,402	$	—	$	4,402

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 June 30, 2017 and December 31, 2016, our cash and cash equivalents consisted primarily of prime institutional money market funds with maturities of three months 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 June 30, 2017, we had $49 million of short-term and $7 million of long-term available for sale investments and the amortized cost basis of the investments approximated their fair value with gross unrealized gains and gross unrealized losses both of less than $1 million. As of December 31, 2016, we had $48 million of short-term and $16 million of long-term available for sale investments and the amortized cost basis of the investments approximated their fair value with both gross unrealized gains 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 three months are classified as cash equivalents and those with remaining maturities of less than one year are classified within short-term investments. Additionally, we have time deposits classified as restricted cash for certain traveler deposits.

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, foreign denominated liabilities related to certain of our loyalty programs and our other 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 June 30, 2017, we were party to outstanding forward contracts hedging our liability and revenue exposures with a total net notional value of $2.4 billion. We had a net forward liability of $3 million and $4 million recorded in accrued expenses and other current liabilities as of June 30, 2017 and December 31, 2016. We recorded $14 million and $(20) million in net gains (losses) from foreign currency forward contracts during the three months ended June 30, 2017 and 2016 as well as $9 million and $(48) million in net gains (losses) during the six months ended June 30, 2017 and 2016.

Assets Measured at Fair Value on a Non-recurring Basis

Our non-financial assets, such as goodwill, intangible assets and property and equipment, as well as equity and cost method investments, are adjusted to fair value only when an impairment charge is recognized. Such fair value measurements are based predominately on Level 3 inputs.

Cost Method Investments. As of both June 30, 2017 and December 31, 2016, the carrying values of our investments accounted for under the cost method totaled $323 million. We periodically evaluate the recoverability of each investment and record a write-down to fair value if a decline in value is determined to be other-than-temporary. During the three and six months ended June 30, 2017, we recorded a $5 million and $6 million other-than-temporary impairment related to cost method investments. The remaining fair value of the impaired investments was approximately $10 million as of June 30, 2017. During the six months ended June 30, 2016, we recorded a $7 million other-than-temporary impairment related to a cost method investment.