Fair Value Measurements

9 Months Ended

Sep. 30, 2023

Financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2023 are classified using the fair value hierarchy in the table below:


	Total		Level 1		Level 2
	(In millions)
Assets
Cash equivalents:
Money market funds	$	135	$	135	$	—

Term deposits	221		—		221
Foreign treasury securities	32		32		—
Derivatives:

Cross-currency interest rate swaps	20		—		20
Investments:

Equity investments	495		495		—
Total assets	$	903	$	662	$	241

Liabilities
Derivatives:
Foreign currency forward contracts	$	8	$	—	$	8

Financial assets measured at fair value on a recurring basis as of December 31, 2022 are classified using the fair value hierarchy in the table below:


	Total		Level 1		Level 2
	(In millions)
Assets
Cash equivalents:
Money market funds	$	3	$	3	$	—

Term deposits	188		—		188
Derivatives:
Foreign currency forward contracts	15		—		15
Cross-currency interest rate swaps	21		—		21
Investments:
Term deposits	48		—		48
Equity investments	564		49		515
Total assets	$	839	$	52	$	787

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.

Valuation of the cross-currency interest rate swaps is based on foreign currency exchange rates and the current interest rate curve, Level 2 inputs.

We hold term deposit investments with financial institutions. Term deposits with original maturities of less than three months are classified as cash equivalents. Those with remaining maturities of less than one year are classified within short-term investments and those with remaining maturities of greater than one year are classified within long-term investments and other assets.

As of September 30, 2023 and December 31, 2022, our cash and cash equivalents consisted primarily of term deposits and money market funds with maturities of three months or less and bank account balances.

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. As of September 30, 2023, we were party to outstanding forward contracts hedging our liability exposures with a total net notional value of $4.1 billion. We had a net forward liability of $8 million ($27 million gross forward liability) as of September 30, 2023 recorded in accrued expenses and other current liabilities and a net forward asset of $15 million ($29 million gross forward asset) as of December 31, 2022 recorded in prepaid expenses and other current assets. We recorded $43 million and $60 million in net losses from foreign currency forward contracts during the three months ended September 30, 2023 and 2022, as well as $58 million and $144 million during the nine months ended September 30, 2023 and 2022.

On March 2, 2022, we entered into two fixed-to-fixed cross-currency interest rate swaps with an aggregate notional amount of €300 million and maturity dates of February 2026. The swaps were designated as net investment hedges of Euro assets with the objective to protect the U.S. dollar value of our net investments in the Euro foreign operations due to movements in foreign currency. The fair value of the cross-currency interest rate swaps was a $20 million asset as of September 30, 2023 and a $21 million asset as of December 31, 2022, recorded in long-term investments and other assets. The gain recognized in interest expense was $4 million during the nine months ended September 30, 2023 and 2022.

Our equity investments include our marketable equity investment in Despegar, a publicly traded company, which is included in long-term investments and other assets in our consolidated balance sheets. During the nine months ended September 30, 2023 and 2022, we recognized a gain of approximately $20 million and a loss of approximately $39 million within other, net in our consolidated statements of operations related to the fair value changes of this equity investment.

In addition, as of September 30, 2023, we have an equity investment related to our approximately 16% ownership interest in Global Business Travel Group, Inc. (“GBTG”), a publicly traded company. During the nine months ended September 30, 2023 and 2022, we recognized a loss of approximately $93 million and approximately $384 million within other, net in our consolidated statements of operations related to the fair value changes of this equity investment. In July 2023, GBTG simplified its organizational structure, and we exchanged our previously held GBT JerseyCo Ltd (“GBT”) shares for an equal number of GBTG shares with no change to our ownership interest. Our previous GBT shares were exchangeable on a 1:1 basis for GBTG shares, and as such, we valued our investment based on the GBTG’s share price. As a result of this exchange, as of the third quarter of 2023, we reclassified our investment from Level 2 to a Level 1 asset.

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 method investments for which we have not elected the fair value option, are adjusted to fair value when an impairment charge is recognized or the underlying investment is sold. Such fair value measurements are based predominately on Level 3 inputs. We measure our minority investments that do not have readily determinable fair values at cost less impairment, adjusted by observable price changes with changes recorded within other, net on our consolidated statements of operations.

Goodwill. During the third quarter of 2023, we recognized a goodwill impairment charge of $297 million related to our trivago segment. This impairment charge resulted from trivago’s recent strategic shift which included intensifying its brand marketing investments with an anticipated decrease in profitability. As a result, we concluded that sufficient indicators existed to require us to perform an interim quantitative assessment of goodwill for our trivago segment as of September 30, 2023, in which we compared the fair value of the reporting unit to its carrying value. The fair value estimate for the reporting unit was based on a blended analysis of the present value of future discounted cash flows and market value approach, Level 3 inputs. The significant estimates used in the discounted cash flows model included our weighted average cost of capital, projected cash flows and the long-term rate of growth. Our assumptions were based on the actual historical performance of the reporting unit and considered the weakening of operating results, and implied risk premiums based on market prices of our equity and debt as of the assessment date. Our significant estimates in the market approach model included identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment and assessing comparable revenue and earnings multiples in estimating the fair value of the reporting unit. The excess of the reporting unit's carrying value over our estimate of the fair value was recorded as the goodwill impairment charge in the third quarter of 2023. As of September 30, 2023, our trivago segment had no goodwill remaining.

Intangible Assets. During the three and nine months ended September 30, 2023, we recognized intangible impairment charges of $15 million related to an indefinite-lived trade name within our trivago segment that resulted from a decrease in the estimated royalty rate. During the three and nine months ended September 30, 2022, we recognized intangible impairment charges of $52 million and $81 million related to an indefinite-lived trade name within our trivago segment that resulted from changes in the weighted average cost of capital. The indefinite-lived trade name asset, classified as Level 3 measurements, was valued using the relief-from-royalty method, which includes unobservable inputs, including projected revenues, royalty rates and weighted average cost of capital. As noted above, trivago is subject to its own reporting and filing requirements and, therefore, assesses goodwill at a lower level, which could result in possible differences in the ultimate amount or timing of impairments recognized. Minority Investments without Readily Determinable Fair Values. As of both September 30, 2023 and December 31, 2022, the carrying values of our minority investments without readily determinable fair values totaled $330 million. During the three and nine months ended September 30, 2023 and 2022, we had no material gains or losses recognized related to these minority investments. As of September 30, 2023, total cumulative adjustments made to the initial cost basis of these investments included $2 million in unrealized upward adjustments and $105 million in unrealized downward adjustments (including impairments).