v2.4.0.6
Fair Value Measurements
 9 Months Ended
Sep. 30, 2012
Fair Value Measurements

Note 4 – Fair Value Measurements

Financial assets and liabilities measured at fair value on a recurring basis as of September 30, 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

    $ 570,426       $ 570,426       $ —     

Time deposits

      101,929         —           101,929   

Investments:

         

Time deposits

      916,491         —           916,491   

Corporate debt securities

      240,127         —           240,127   
  

 

 

     

 

 

     

 

 

  

Total assets

    $ 1,828,973       $ 570,426       $ 1,258,547   
  

 

 

     

 

 

     

 

 

  

Liabilities

         

Foreign currency forward contracts

    $ 4,977       $ —         $ 4,977   
  

 

 

     

 

 

     

 

 

  

Financial assets measured at fair value on a recurring basis as of December 31, 2011 are classified using the fair value hierarchy in the table below:

 

     Total      Level 1      Level 2  
     (In thousands)  

Assets

         

Cash equivalents:

         

Money market funds

    $ 310,075       $ 310,075       $ —     

Derivatives:

         

Foreign currency forward contracts

      1,043         —           1,043   

Investments:

         

Time deposits

      592,162         —           592,162   

Corporate debt securities

      268,664         —           268,664   
  

 

 

     

 

 

     

 

 

  

Total assets

    $ 1,171,944       $ 310,075       $ 861,869   
  

 

 

     

 

 

     

 

 

  

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 September 30, 2012 and December 31, 2011, 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 September 30, 2012, we had $126 million of short-term and $114 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 $3 million and gross unrealized losses of less than $1 million. As of December 31, 2011, we had $57 million of short-term and $212 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 $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. Of the total time deposit investments, $242 million and $228 million as of September 30, 2012 and December 31, 2011 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 September 30, 2012, we were party to outstanding forward contracts hedging our liability and revenue exposures with a total net notional value of $1.1 billion. We had a net forward liability of $5 million as of September 30, 2012 recorded in accrued expenses and other current liabilities and a net forward asset of $1 million as of December 31, 2011 recorded in prepaid expenses and other current assets. We recorded $22 million in net losses and $5 million in net gains from foreign currency forward contracts during the three months ended September 30, 2012 and 2011, and $18 million and less than $1 million in net losses for the nine months ended September 30, 2012 and 2011.