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Investments and Fair Value Measurement | 9 Months Ended
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Sep. 30, 2021
Fair Value Disclosures [Abstract] |
Investments and Fair Value Measurement | Note 3 – Investments and Fair Value Measurement Investments Our investments on the condensed consolidated balance sheets consisted of the following (in millions):
|  | As of
|  | December 31, 2020 |  | September 30, 2021
Classified as short-term investments: |  |  |  |
Marketable debt securities (1): |  |  |  |
Commercial paper |  | $ | 457 |  |  | $ | — |
U.S. government and agency securities |  | 429 |  |  | — |
Corporate bonds |  | 294 |  |  | — |
Short-term investments |  | $ | 1,180 |  |  | $ | — |
Classified as investments: |  |  |  |
Non-marketable equity securities: |  |  |  |
Didi |  | $ | 6,299 |  |  | $ | 4,126 |
Aurora (2) |  | — |  |  | 2,250 |
Other (3) |  | 329 |  |  | 307 |
Non-marketable debt securities: |  |  |  |
Grab (4) |  | 2,341 |  |  | 4,089 |
Marketable equity securities |  | — |  |  | 1,386 |
Note receivable from a related party |  | 83 |  |  | 81 |
Investments |  | $ | 9,052 |  |  | $ | 12,239 |
(1) Excluding marketable debt securities classified as cash equivalents and restricted cash equivalents. (2) For further information, see the section titled “Aurora Investments” below and Note 17 – Divestiture. (3) These balances include certain investments recorded at fair value with changes in fair value recorded in earnings due to the election of the fair value option of accounting for financial instruments. (4) Recorded at fair value with changes in fair value recorded in other comprehensive income (loss), net of tax, unless subject to credit loss. Assets and Liabilities Measured at Fair Value on a Recurring Basis The following table presents our financial assets and liabilities measured at fair value on a recurring basis based on the three-tier fair value hierarchy (in millions):
|  | As of December 31, 2020 |  | As of September 30, 2021
|  | Level 1 |  | Level 2 |  | Level 3 |  | Total |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Financial Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 2,386 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,386 |  |  | $ | 4,214 |  |  | $ | — |  |  | $ | — |  |  | $ | 4,214 |
Commercial paper |  | — |  |  | 611 |  |  | — |  |  | 611 |  |  | — |  |  | — |  |  | — |  |  | — |
U.S. government and agency securities |  | — |  |  | 542 |  |  | — |  |  | 542 |  |  | — |  |  | — |  |  | — |  |  | — |
Corporate bonds |  | — |  |  | 323 |  |  | — |  |  | 323 |  |  | — |  |  | — |  |  | — |  |  | — |
Non-marketable debt securities |  | — |  |  | — |  |  | 2,341 |  |  | 2,341 |  |  | — |  |  | — |  |  | 4,089 |  |  | 4,089 |
Non-marketable equity securities |  | — |  |  | — |  |  | 52 |  |  | 52 |  |  | — |  |  | 4,126 |  |  | 2,278 |  |  | 6,404 |
Marketable equity securities |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,386 |  |  | — |  |  | — |  |  | 1,386 |
Note receivable from a related party |  | — |  |  | — |  |  | 83 |  |  | 83 |  |  | — |  |  | — |  |  | 81 |  |  | 81 |
Total financial assets |  | $ | 2,386 |  |  | $ | 1,476 |  |  | $ | 2,476 |  |  | $ | 6,338 |  |  | $ | 5,600 |  |  | $ | 4,126 |  |  | $ | 6,448 |  |  | $ | 16,174 |
Financial Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
MLU B.V. Call Option (1) |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 230 |  |  | $ | 230 |
Total financial liabilities |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 230 |  |  | $ | 230 |
(1) For further information, see Note 4 – Equity Method Investments. Didi Investment During the first quarter of 2021, we completed the sale of $500 million of our Didi shares and realized immaterial gains from this transaction. In addition, we recorded unrealized gains of $71 million from remeasurement of the carrying value of the remaining Didi shares under the measurement alternative during the three months ended March 31, 2021. On June 30, 2021, Didi started trading on the New York Stock Exchange, therefore our investment in preferred shares of Didi, which was previously accounted for under the measurement alternative on a non-recurring basis, had a readily determinable fair value and therefore changed to an investment measured at fair value on a recurring basis. As of September 30, 2021, our Didi investment in preferred shares has been converted to ordinary shares and classified as a non-marketable equity security due to a restriction on trading of ordinary shares. As of September 30, 2021, the fair value of our Didi investment is based on readily available pricing sources for comparable instruments, adjusted by a discount for lack of marketability due to the restriction on trading the shares (Level 2). During the three and nine months ended September 30, 2021,we recognized an unrealized loss of $3.2 billion and $1.7 billion, respectively, on this investment in other income (expense), net in our condensed consolidated statements of operations. Zomato Investment In July 2021, Zomato Media Private Limited (“Zomato”), in which we held preferred shares that were previously classified as non-marketable equity securities and accounted for under the measurement alternative on a non-recurring basis, completed its initial public offering (“IPO”) in India. As of September 30, 2021, our Zomato investment has been converted to ordinary shares and classified as a marketable equity security with a readily determinable fair value (Level 1) in the table presenting our financial assets and liabilities measured at fair value on a recurring basis. During the three and nine months ended September 30, 2021, we recognized an unrealized gain of $994 million on this investment in other income (expense), net in our condensed consolidated statements of operations. As of September 30, 2021, the carrying value of the investment was $1.1 billion. Our investment is subject to a lock-up period in which our ability to sell is restricted until July 2022. During the nine months ended September 30, 2021, we did not make any transfers between the levels of the fair value hierarchy. The following table summarizes the amortized cost and fair value of our debt securities with a stated contractual maturity or redemption date (in millions):
|  | As of September 30, 2021
|  | Amortized Cost |  | Fair Value
Within one year |  | $ | — |  |  | $ | — |
One year through five years |  | 2,281 |  |  | 4,089 |
Total |  | $ | 2,281 |  |  | $ | 4,089 |
The following table summarizes the amortized cost, unrealized gains and losses, and fair value of our debt securities at fair value on a recurring basis (in millions):
|  | As of December 31, 2020 |  | As of September 30, 2021
|  | Amortized Cost |  | Unrealized Gains |  | Unrealized Losses |  |  | Fair Value |  | Amortized Cost |  | Unrealized Gains |  | Unrealized Losses |  |  | Fair Value
Commercial paper |  | $ | 611 |  |  | $ | — |  |  | $ | — |  |  |  | $ | 611 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |  | $ | — |
U.S. government and agency securities |  | 542 |  |  | — |  |  | — |  |  |  | 542 |  |  | — |  |  | — |  |  | — |  |  |  | — |
Corporate bonds |  | 322 |  |  | 1 |  |  | — |  |  |  | 323 |  |  | — |  |  | — |  |  | — |  |  |  | — |
Non-marketable debt securities |  | 2,281 |  |  | 60 |  |  | — |  |  |  | 2,341 |  |  | 2,281 |  |  | 1,808 |  |  | — |  |  |  | 4,089 |
Total |  | $ | 3,756 |  |  | $ | 61 |  |  | $ | — |  |  |  | $ | 3,817 |  |  | $ | 2,281 |  |  | $ | 1,808 |  |  | $ | — |  |  |  | $ | 4,089 |
As of December 31, 2020 and September 30, 2021, there were no allowance for credit losses related to our available-for-sale debt securities. We measure our cash equivalents and certain investments at fair value. Level 1 instrument valuations are based on quoted market prices of the identical underlying security. Level 2 instrument valuations are obtained from readily available pricing sources for comparable instruments, identical instruments in less active markets, or models using market observable inputs. Level 3 instrument valuations are valued based on unobservable inputs and other estimation techniques due to the absence of quoted market prices, inherent lack of liquidity and the long-term nature of such financial instruments. As of December 31, 2020 and September 30, 2021, our Level 3 non-marketable debt securities and non-marketable equity securities primarily consist of common stock investments and preferred stock investments in privately held companies without readily determinable fair values. Depending on the investee’s financing activity in a reporting period, management’s estimate of fair value may be primarily derived from the investee’s financing transactions, such as the issuance of preferred stock to new investors. The price in these transactions generally provides the best indication of the enterprise value of the investee. Additionally, based on the timing, volume, and other characteristics of the transaction, we may supplement this information by using other valuation techniques, including the guideline public company approach. The guideline public company approach relies on publicly available market data of comparable companies and uses comparative valuation multiples of the investee’s revenue (actual and forecasted), and therefore, unobservable input used in this valuation technique primarily consists of short-term revenue projections. Once the fair value of the investee is estimated, an option-pricing model (“OPM”), a common stock equivalent (“CSE”) method or a hybrid approach is employed to allocate value to various classes of securities of the investee, including the class owned by us. The model involves making assumptions around the investees’ expected time to liquidity and volatility. An increase or decrease in any of the unobservable inputs in isolation, such as the security price in a significant financing transaction of the investee, could result in a material increase or decrease in our estimate of fair value. Other unobservable inputs, including short-term revenue projections, time to liquidity, and volatility are less sensitive to the valuation in the respective reporting periods, as a result of the primary weighting on the investee’s financing transactions. In the future, depending on the weight of evidence and valuation approaches used, these or other inputs may have a more significant impact on our estimate of fair value. We determine realized gains or losses on the sale of equity and debt securities on a specific identification method. Grab Investment To determine the fair value of our investment in Grab as of September 30, 2021, we utilized a hybrid approach, incorporating a CSE method along with an OPM. The CSE method assumes an if-converted scenario (for example an IPO or a special purpose acquisition company (“SPAC”) transaction), where the OPM approach allocates equity value to individual securities within the investees’ capital structure based on contractual rights and preferences. As a result of the valuation performed, we recognized pre-tax unrealized gains of $497 million and $1.7 billion on this investment during the three and nine months ended September 30, 2021, respectively, in other comprehensive income (loss), net of tax in our condensed consolidated statements of comprehensive income (loss). The following table summarizes information about the significant unobservable inputs used in the fair value measurement for our Grab investment as of September 30, 2021:
Fair value method |  | Relative weighting |  | Key unobservable inputs
OPM |  | 40% |  | Transaction price per share |  | $6.16
|  |  |  | Volatility |  | 64%
|  |  |  | Estimated time to liquidity |  | 1.25 years
|  |  |  | Market adjustment |  | 5%
CSE |  | 60% |  | Discount rate |  | 25%
|  |  |  | Estimated time to liquidity |  | 0.25 years
Aurora Investments On January 19, 2021, we completed the sale of our ATG Business to Aurora. As consideration for the sale of our ATG Business to Aurora, we received common stock in Aurora. Concurrently, we invested in Aurora’s preferred stock. For further information, refer to Note 17 – Divestiture. We hold one seat on Aurora’s board of directors and have the ability to hold a second seat, which, along with our common and preferred stock ownership (our “Aurora Investments”) generate significant influence. We elected to apply the fair value option to our Aurora common stock and preferred stock investments in order to provide consistency of accounting treatment to our Aurora Investments. The Aurora Investments are measured at fair value on a recurring basis with changes in fair value reflected in other income (expense), net, in the condensed consolidated statements of operations. The fair value of the Aurora Investments as of September 30, 2021 was determined by a hybrid approach, incorporating a CSE method along with an OPM, weighted at 50% and 50%, respectively, as a result of an announced SPAC merger. The CSE method assumes an if-converted scenario (for example a SPAC), where the OPM approach allocates equity value to individual securities within the investees’ capital structure based on contractual rights and preferences. Significant unobservable inputs to the OPM were volatility of 66% and time to liquidity of 4.25 years. As a result of the valuation performed, we recognized unrealized gains of $102 million and $573 million on this investment in other income (expense), net in our condensed consolidated statements of operations during the three and nine months ended September 30, 2021, respectively. Summarized financial information for Aurora for the six months ended June 30, 2021, the most recent period available, is as follows (in millions):
Results of Operations Data |  | Six Months Ended June 30, 2021
Total operating expenses |  | $ | 373 |
Loss from operations |  | (373) |
Net loss |  | (370) |
Balance Sheet Data |  | As of June 30, 2021
Current assets |  | $ | 808 |
Total assets |  | 2,796 |
Current liabilities |  | 72 |
Total liabilities |  | 254 |
Redeemable convertible preferred stock |  | 2,161 |
Financial Assets and Liabilities Measured at Fair Value Using Level 3 Inputs The following table presents a reconciliation of our financial assets and liabilities measured and recorded at fair value on a recurring basis as of September 30, 2021, using significant unobservable inputs (Level 3) (in millions):
|  | Non-marketable Debt Securities |  | Non-marketable Equity Securities |  | Note Receivables |  | MLU B.V. Call Option
Balance as of December 31, 2020 |  | $ | 2,341 |  |  | $ | 52 |  |  | $ | 83 |  |  | $ | — |
Total net gains (losses) |  |  |  |  |  |  |  |
Included in earnings |  | — |  |  | 549 |  |  | (2) |  |  | — |
Included in other comprehensive income (loss) |  | 1,748 |  |  | — |  |  | — |  |  | — |
Purchases |  | — |  |  | 1,677 |  |  | — |  |  | — |
Issuance |  | — |  |  | — |  |  | — |  |  | 230 |
Balance as of September 30, 2021 |  | $ | 4,089 |  |  | $ | 2,278 |  |  | $ | 81 |  |  | $ | 230 |
Assets Measured at Fair Value on a Non-Recurring Basis Non-Financial Assets Our non-financial assets, such as goodwill, intangible assets and property and equipment are adjusted to fair value when an impairment charge is recognized. Such fair value measurements are based predominantly on Level 3 inputs. Non-Marketable Equity Securities Our non-marketable equity securities are investments in privately held companies without readily determinable fair values. The carrying value of our non-marketable equity securities are adjusted based on price changes from observable transactions of identical or similar securities of the same issuer (referred to as the measurement alternative) or for impairment. Any changes in carrying value are recorded within other income (expense), net in the condensed consolidated statements of operations. Non-marketable equity securities are classified within Level 3 in the fair value hierarchy because we estimate the fair value of these securities based on valuation methods, including the CSE and OPM methods, using the transaction price of similar securities issued by the investee adjusted for contractual rights and obligations of the securities we hold. We did not record any realized gains or losses for our non-marketable equity securities measured at fair value on a non-recurring basis during the three and nine months ended September 30, 2020 and 2021. The following is a summary of unrealized gains and losses from remeasurement (referred to as upward or downward adjustments) recorded in other income (expense), net in the condensed consolidated statements of operations, and included as adjustments to the carrying value of non-marketable equity securities (in millions):
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2020 |  | 2021 |  | 2020 |  | 2021
Upward adjustments |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 71 |
Downward adjustments (including impairment) |  | — |  |  | — |  |  | (1,690) |  |  | — |
Total unrealized gain (loss) for non-marketable equity securities |  | $ | — |  |  | $ | — |  |  | $ | (1,690) |  |  | $ | 71 |
The following table summarizes the total carrying value of our non-marketable equity securities measured at fair value on a non-recurring basis held, including cumulative unrealized upward and downward adjustments made to the initial cost basis of the securities (in millions):
|  | As of
|  | December 31, 2020 |  | September 30, 2021
Initial cost basis |  | $ | 6,282 |  |  | $ | 279 |
Upward adjustments |  | 1,984 |  |  | — |
Downward adjustments (including impairment) |  | (1,690) |  |  | — |
Total carrying value at the end of the period |  | $ | 6,576 |  |  | $ | 279 |

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258 + Details
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