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Fair Value Measurements

6 Months Ended

Jun. 30, 2021

The FASB literature regarding fair value measurements for certain assets and liabilities establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of “observable inputs” and minimize the use of “unobservable inputs.” The three levels of inputs used to measure fair value are as follows:

•Level 1—Quoted prices in active markets for identical assets or liabilities;

•Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets or other inputs that are observable or can be corroborated by observable market data; and

•Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.

Fair Value Measurements on a Recurring Basis

The table below segregates all of our financial assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date (amounts in millions):


			Fair Value Measurements at June 30, 2021 Using
	As of June 30, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance Sheet Classification
Financial Assets:
Recurring fair value measurements:
Money market funds	$	8,906	$	8,906	$	—	$	—	Cash and cash equivalents
Foreign government treasury bills	30		30		—		—		Cash and cash equivalents
U.S. treasuries and government agency securities	322		322		—		—		Other current assets
Equity securities	94		94		—		—		Other current assets
Foreign currency forward contracts designated as hedges	6		—		6		—		Other current assets & Other assets

Total	$	9,358	$	9,352	$	6	$	—

Financial Liabilities:

Foreign currency forward contracts designated as hedges	$	(8)	$	—	$	(8)	$	—	Accrued expenses and other liabilities


			Fair Value Measurements at December 31, 2020 Using
	As of December 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance Sheet Classification
Financial Assets:
Recurring fair value measurements:
Money market funds	$	8,345	$	8,345	$	—	$	—	Cash and cash equivalents
Foreign government treasury bills	34		34		—		—		Cash and cash equivalents
U.S. treasuries and government agency securities	164		164		—		—		Other current assets


Total	$	8,543	$	8,543	$	—	$	—

Financial Liabilities:
Foreign currency forward contracts not designated as hedges	$	(2)	$	—	$	(2)	$	—	Accrued expenses and other liabilities
Foreign currency forward contracts designated as hedges	(24)		—		(24)		—		Accrued expenses and other liabilities
Total	$	(26)	$	—	$	(26)	$	—

Foreign Currency Forward Contracts

Foreign Currency Forward Contracts Designated as Hedges (“Cash Flow Hedges”)

The total gross notional amounts and fair values of our Cash Flow Hedges, all of which have remaining maturities of 16 months or less as of June 30, 2021, are as follows (amounts in millions):


	As of June 30, 2021				As of December 31, 2020
	Notional amount		Fair value gain (loss)		Notional amount		Fair value gain (loss)
Foreign Currency:
Buy USD, Sell Euro	$	860	$	(2)	$	542	$	(24)

For the three and six months ended June 30, 2021 and June 30, 2020, pre-tax net realized gains (losses) associated with our Cash Flow Hedges that were reclassified out of “Accumulated other comprehensive income (loss)” and into earnings were not material.

Foreign Currency Forward Contracts Not Designated as Hedges

The gross notional amounts and fair values of our foreign currency forward contracts not designated as hedges are as follows (amounts in millions):


	As of June 30, 2021				As of December 31, 2020
	Notional amount		Fair value gain (loss)		Notional amount		Fair value gain (loss)
Foreign Currency:




Buy USD, Sell GBP	$	219	$	—	$	116	$	(2)

For the three and six months ended June 30, 2021 and June 30, 2020, pre-tax net gains (losses) associated with these forward contracts were recorded in “General and administrative expenses” and were not material.

Equity Securities Fair Value Measurement

At December 31, 2020, we held an investment in equity securities with a carrying value of $45 million. The investment did not have a readily determinable fair value, and was carried at cost, less impairment, and adjusted for changes resulting from observable price changes in orderly transactions for identical or similar investments in the same issuer.

During June 2021, the investee completed a merger with a special purpose acquisition company (“SPAC”) and, as a result, our investment was converted into common shares of the publicly traded company. In connection with the SPAC transaction, we sold a portion of our investment for $22 million and recognized a realized gain of $16 million during the three months ended June 30, 2021. Additionally, our remaining investment is now measured at fair value at the end of each reporting period, and we recognized an unrealized gain of $56 million during the three months ended June 30, 2021 to adjust the investment to fair value. As of June 30, 2021, the carrying value of the investment was $94 million and was classified within “Other current assets” in our condensed consolidated balance sheets. The realized and unrealized gains were recorded within “Interest and other expense (income), net” in our condensed consolidated statement of operations for the three and six months ended June 30, 2021.

- 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.

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