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FAIR VALUE MEASUREMENTS | 6 Months Ended
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Jun. 30, 2022
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS Financial assets and liabilities measured at fair value on a recurring basis at June 30, 2022 and nonrecurring fair value measurements are classified in the categories described in the table below (in millions):
|  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Recurring fair value measurements |  |  |  |  |  |  |  |
ASSETS: |  |  |  |  |  |  |  |
Cash equivalents and restricted cash equivalents: |  |  |  |  |  |  |  |
Money market fund investments |  | $ | 10,850 |  |  | $ | — |  |  | $ | — |  |  | $ | 10,850 |
Time deposits and certificates of deposit |  | 77 |  |  | — |  |  | — |  |  | 77 |
Short-term investments: |  |  |  |  |  |  |  |
Debt securities |  | — |  |  | 25 |  |  | — |  |  | 25 |
Long-term investments: |  |  |  |  |  |  |  |
Equity securities |  | 2,228 |  |  | — |  |  | — |  |  | 2,228 |
Derivatives: |  |  |  |  |  |  |  |
Foreign currency exchange derivatives |  | — |  |  | 11 |  |  | — |  |  | 11 |
Total assets at fair value |  | $ | 13,155 |  |  | $ | 36 |  |  | $ | — |  |  | $ | 13,191 |
LIABILITIES: |  |  |  |  |  |  |  |
Foreign currency exchange derivatives |  | $ | — |  |  | $ | 24 |  |  | $ | — |  |  | $ | 24 |
Nonrecurring fair value measurements |  |  |  |  |  |  |  |
Investment in equity securities of a private company (1) |  | $ | — |  |  | $ | — |  |  | $ | 122 |  |  | $ | 122 |
Total nonrecurring fair value measurements |  | $ | — |  |  | $ | — |  |  | $ | 122 |  |  | $ | 122 |
(1) At June 30, 2022, the investment in Yanolja was written down to its estimated fair value of $122 million, resulting in an impairment charge of $184 million (see Note 5). Financial assets and liabilities measured at fair value on a recurring basis at December 31, 2021 and nonrecurring fair value measurements are classified in the categories described in the table below (in millions):
|  | Level 1 |  | Level 2 |  |  |  | Total
Recurring fair value measurements (1) |  |  |  |  |  |  |  |
ASSETS: |  |  |  |  |  |  |  |
Cash equivalents and restricted cash equivalents: |  |  |  |  |  |  |  |
Money market fund investments |  | $ | 10,410 |  |  | $ | — |  |  |  |  | $ | 10,410 |
Time deposits and certificates of deposit |  | 25 |  |  | — |  |  |  |  | 25 |
Short-term investments: |  |  |  |  |  |  |  |
Debt securities |  | — |  |  | 25 |  |  |  |  | 25 |
Long-term investments: |  |  |  |  |  |  |  |
Equity securities |  | 2,850 |  |  | — |  |  |  |  | 2,850 |
Derivatives: |  |  |  |  |  |  |  |
Foreign currency exchange derivatives |  | — |  |  | 5 |  |  |  |  | 5 |
Total assets at fair value |  | $ | 13,285 |  |  | $ | 30 |  |  |  |  | $ | 13,315 |
LIABILITIES: |  |  |  |  |  |  |  |
Foreign currency exchange derivatives |  | $ | — |  |  | $ | 11 |  |  |  |  | $ | 11 |
Nonrecurring fair value measurements |  |  |  |  |  |  |  |
Investments in equity securities of private companies (2) |  | $ | — |  |  | $ | 325 |  |  |  |  | $ | 325 |
Total nonrecurring fair value measurements |  | $ | — |  |  | $ | 325 |  |  |  |  | $ | 325 |
(1) The Company did not have any Level 3 fair value measurements at December 31, 2021. (2) During the year ended December 31, 2021, the Company recorded upward adjustments to its investments in equity securities of private companies, including Yanolja, based on observable price changes in orderly transactions for identical or similar investments of the same issuer. There are three levels of inputs to measure fair value. The definition of each input is described below: Level 1: Quoted prices in active markets that are accessible by the Company at the measurement date for identical assets and liabilities. Level 2: Inputs that are observable, either directly or indirectly. Such prices may be based upon quoted prices for identical or comparable securities in active markets or inputs not quoted on active markets, but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data is available. Rollforward of Level 3 Recurring Fair Value Measurements The following table summarizes the fair value adjustments for debt securities measured using significant unobservable inputs (level 3) (in millions):
|  |  | For the Six Months Ended June 30, 2021
Balance, beginning of year |  |  | $ | 200 |
Unrealized gains included in other comprehensive (loss) income (1) |  |  | 126 |
Balance, end of period |  |  | $ | 326 |
(1) Included in Net unrealized gains on available-for-sale securities in the Unaudited Consolidated Statements of Comprehensive Income (Loss). Investments See Note 5 for additional information related to the Company's investments. The valuation of the Company's investment in debt securities is considered a "Level 2" valuation because the Company has access to quoted prices for identical or comparable securities, but does not have visibility into the volume and frequency of trading for this investment. A market approach is used for recurring fair value measurements and the valuation techniques use inputs that are observable, or can be corroborated by observable data, in an active marketplace. Investments in private companies measured using Level 3 inputs The Company's investments measured using Level 3 inputs primarily consist of investments in privately-held companies that are classified as equity securities without readily determinable fair values. Fair values of privately held securities are estimated using a variety of valuation methodologies, including both market and income approaches. The Company uses valuation techniques appropriate for the type of investment and the information available about the investee as of the valuation date to determine fair value. Recent financing transactions in the investee, such as new investments in preferred stock, are generally considered the best indication of the enterprise value and therefore used as a basis to estimate fair value. However, based on a number of factors, such as the proximity in timing to the valuation date or the volume or other terms of these financing transactions, the Company may also use other valuation techniques to supplement this data, including the income approach. When a recent financing transaction occurs and represents fair value, the Company also uses the calibration process, as appropriate, when estimating fair value on subsequent measurement dates. Calibration is the process of using observed transactions in the investee company's own instruments to ensure that the valuation techniques that will be employed to value the investee company investment on subsequent measurement dates begin with assumptions that are consistent with the original observed transaction as well as any more recent observed transactions in the instruments issued by the investee company. In July 2021, Yanolja announced a new round of funding which was completed in October 2021 along with certain other transactions. As a result of these observable transactions, the Company increased the carrying value of its investment in Yanolja to $306 million as of December 31, 2021. Considering the recent significant adverse changes in the market valuations of companies in the travel and technology industries, the Company evaluated its investment in Yanolja for impairment and recognized an impairment charge of $184 million during the three months ended June 30, 2022, resulting in an adjusted carrying value of $122 million at June 30, 2022. As discussed below, the Company used unobservable inputs to determine fair value. The Company used a combination of the market approach and the income approach in estimating the fair value of its investment in Yanolja as of June 30, 2022. The market approach estimates value using prices and other relevant information generated by market transactions involving identical or comparable companies. The income approach estimates value based on the expectation of future cash flows that a company will generate. These future cash flows are discounted to their present values using a discount rate based on a company’s weighted-average cost of capital, and is adjusted to reflect the risks inherent in its cash flows. The key unobservable inputs and ranges used include, for the market approach, percentage decrease in the calibrated EBITDA multiple (36%) and for the income approach, the weighted average cost of capital (10%-14%) and terminal EBITDA multiple (14x-16x). Significant changes in any of these inputs in isolation would result in significantly different fair value measurements. Generally, a change in the assumption used for EBITDA multiples would result in a directionally similar change in the fair value and a change in the assumption used for weighted average cost of capital would result in a directionally opposite change in the fair value. The determination of the fair values of investments, where the Company is a minority shareholder and has access to limited information from the investee, reflects numerous assumptions that are subject to various risks and uncertainties, including key assumptions regarding the investee’s expected growth rates and operating margin, as well as other key assumptions with respect to matters outside of the Company's control, such as discount rates and market comparables. It requires significant judgments and estimates and actual results could be materially different than those judgments and estimates utilized in the fair value estimate. Future events and changing market conditions may lead the Company to re-evaluate the assumptions reflected in the valuation which may result in a need to recognize an additional impairment charge that could have a material adverse effect on the Company's results of operations. Derivatives The Company's derivative instruments are valued using pricing models. Pricing models take into account the contract terms as well as multiple inputs where applicable, such as interest rate yield curves, option volatility, and foreign currency exchange rates. The valuation of derivatives are considered "Level 2" fair value measurements. The Company's derivative instruments are typically short-term in nature. The Company reports the fair values of its derivative assets and liabilities on a gross basis in the Consolidated Balance Sheets in "Other current assets" and "Accrued expenses and other current liabilities," respectively. In the normal course of business, the Company is exposed to the impact of foreign currency fluctuations which it mitigates by following established risk management policies and procedures, including the use of derivatives. The Company enters into foreign currency forward contracts to hedge its exposure to the impact of movements in foreign currency exchange rates primarily on its transactional balances denominated in currencies other than the functional currency and does not use derivatives for trading or speculative purposes. As of June 30, 2022 and December 31, 2021, the Company did not designate any foreign currency exchange derivatives as hedges for accounting purposes. The table below provides estimated fair values and notional amounts of foreign currency exchange derivatives outstanding at June 30, 2022 and December 31, 2021 (in millions). The notional amount of a foreign currency forward contract is the contracted amount of foreign currency to be exchanged and is not recorded in the balance sheets.
| June 30, 2022 |  | December 31, 2021
Estimated fair value of derivative assets | $ | 11 |  |  | $ | 5 |
Estimated fair value of derivative liabilities | $ | 24 |  |  | $ | 11 |
Notional amount: |  |  |
Foreign currency purchases | $ | 1,338 |  |  | $ | 840 |
Foreign currency sales | $ | 2,076 |  |  | $ | 1,857 |
The Company recorded losses of $40 million and $56 million for the three and six months ended June 30, 2022, respectively, in "Other income (expense), net" in the Unaudited Consolidated Statements of Operations, related to foreign currency exchange derivatives. Other Financial Assets and Liabilities At June 30, 2022 and December 31, 2021, the Company's cash consisted of bank deposits. Cash equivalents principally include money market fund investments, time deposits, and certificates of deposit and their carrying value generally approximates the fair value as they are readily convertible to known amounts of cash. Other financial assets and liabilities, including restricted cash, accounts payable, accrued expenses, and deferred merchant bookings, are carried at cost which approximates their fair values because of the short-term nature of these items. Accounts receivable and other financial assets measured at amortized cost are carried at cost less an allowance for expected credit losses to present the net amount expected to be collected (see Note 7). See Note 9 for the estimated fair value of the Company's outstanding senior notes, including the estimated fair value of the Company's convertible senior notes.

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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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