Fair Value Measurement Of Assets And Liabilities

6 Months Ended

Jun. 30, 2022

Fair Value Measurement Of Assets And Liabilities [Abstract]

Fair Value Measurement Of Assets And Liabilities

8. Fair value measurement of assets and liabilities

The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021:


		Quoted Prices in				Quoted Prices in
	Balances as of	active markets for	Significant other	Unobservable	Balances as of	active markets for	Significant other	Unobservable
	June 30,	identical Assets	observable inputs	inputs	December 31,	identical Assets	observable inputs	inputs
Description	2022	(Level 1)	(Level 2)	(Level 3)	2021	(Level 1)	(Level 2)	(Level 3)
	(In millions)
Assets
Cash and Cash Equivalents:
Money Market Funds	$ 321	$ 321	$ —	$ —	$ 1,079	$ 1,079	$ —	$ —
Sovereign Debt Securities (1)	—	—	—	—	16	16	—	—
Restricted Cash and cash equivalents:
Money Market Funds	207	207	—	—	210	210	—	—
Sovereign Debt Securities (Central Bank of Brazil Mandatory Guarantee) (1)	135	135	—	—	296	296	—	—
Investments:
Sovereign Debt Securities (Central Bank of Brazil Mandatory Guarantee) (1)	748	748	—	—	602	602	—	—
Sovereign Debt Securities (1) (2)	739	739	—	—	228	228	—	—
Corporate Debt Securities	55	55	—	—	—	—	—	—
Other Assets:
Derivative Instruments	6	—	6	—	17	—	—	17
Total Financial Assets	$ 2,211	$ 2,205	$ 6	$ —	$ 2,448	$ 2,431	$ —	$ 17
Liabilities:
Contingent considerations	$ 9	$ —	$ —	$ 9	$ 9	$ —	$ —	$ 9
Long-term retention plan	28	—	28	—	103	—	103	—
Derivative Instruments	21	—	21	—	6	—	—	6
Total Financial Liabilities	$ 58	$ —	$ 49	$ 9	$ 118	$ —	$ 103	$ 15

(1)Measured at fair value with impact on the consolidated statement of income for the application of the fair value option. (See Note 2 – Fair value option applied to certain financial instruments.)

(2)As of June 30, 2022 and December 31, 2021 includes $15 million and $13 million, respectively, of investments from securitization transactions that are restricted to the payment of amounts due to third-party investors. (See Note 4 - Cash, cash equivalents, restricted cash and cash equivalents and investments.)

As of June 30, 2022 and December 31, 2021, the Company’s financial assets and liabilities were valued at fair value using i) Level 1 inputs: unadjusted quoted prices in active markets (Level 1 instrument valuations are obtained from observable inputs that reflect quoted prices (unadjusted) for identical assets in active markets); ii) Level 2 inputs: obtained from readily-available pricing sources for comparable instruments as well as instruments with inactive markets at the measurement date; and iii) Level 3 inputs: valuations based on unobservable inputs reflecting Company assumptions (fair value of derivative instruments is determined considering the prevailing risk free interest rate and spot exchange rate, fair value of contingent considerations is determined based on the probability of achievement of the performance targets arising from each acquisition, as well as the Company’s historical experience with similar arrangements).

The following tables summarize the reconciliation of the financial assets and liabilities measured at fair value using Level 3 inputs as of June 30, 2022 and December 31, 2021:


		Balance as of December 31, 2021		Net Additions		Settlements		Foreign Currency Translation		Gain (Losses) in Other Comprehensive Income		Gain (Losses) on Income Statement		Transfers out of level 3		Balance as of June 30, 2022
Derivative Instruments, net	$	11	$	2	$	7	$	2	$	(15)	$	(22)	$	15	$	—
Contingent Considerations		9		—		—		—		—		—		—		9
Total	$	20	$	2	$	7	$	2	$	(15)	$	(22)	$	15	$	9


		Balance as of December 31, 2020		Net Additions		Settlements		Foreign Currency Translation		Gain (Losses) in Other Comprehensive Income		Gain (Losses) on Income Statement		Transfers out of level 3		Balance as of December 31, 2021
Derivative Instruments, net	$	(14)	$	3	$	14	$	(3)	$	11	$	—	$	—	$	11
Contingent Considerations		5		4		—		—		—		—		—		9
Total	$	(9)	$	7	$	14	$	(3)	$	11	$	—	$	—	$	20

As of June 30, 2022 and December 31, 2021, the carrying value of the Company’s financial assets (except for loans receivable) and liabilities (except for the 2028 Notes) measured at amortized cost approximated their fair value mainly because of their short-term maturity. These assets and liabilities included cash and cash equivalents, restricted cash and cash equivalents and short-term investments (excluding money markets funds and debt securities), accounts receivable, credit card receivables and other means of payment, funds payable to customers, amounts payable due to credit and debit card transactions, other assets (excluding derivative instruments), accounts payable, salaries and social security payable (excluding variable LTRP), provisions and other liabilities (excluding contingent considerations and derivative instruments). If these financial instruments were measured at fair value in the financial statements, they would be classified as Level 2. On the other hand, as of June 30, 2022 and December 31, 2021, the estimated fair value of the loans receivables, which is based on Level 3 inputs, is $1,934 million and $1,260 million, respectively, and were determined based on Company’s assumptions. As of June 30, 2022 and December 31, 2021, the estimated fair value of the 2028 Notes, which is based on Level 2 inputs, is $305 million and $331 million, respectively, and were determined based on market interest rates. The rest of the loans payable and other financial liabilities approximate their fair value because the effective interest rates are not materially different from market interest rates.
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The following table summarizes the fair value for those financial assets and liabilities of the Company measured at amortized cost as of June 30, 2022 and December 31, 2021:



	Balances as of	Fair Value as of	Balances as of	Fair Value as of
	June 30,	June 30,	December 31,	December 31,
	2022	2022	2021	2021
	(In millions)
Assets
Time Deposits	$ 536	$ 536	$ 16	$ 16
Accounts receivable, net	102	102	98	98
Credit Card receivables and other means of payment, net	2,501	2,501	1,839	1,839
Loans receivable, net	1,845	1,934	1,260	1,260
Other assets	550	550	458	458
Total Assets	$ 5,534	$ 5,623	$ 3,671	$ 3,671
Liabilities
Accounts payable and accrued expenses	$ 1,131	$ 1,131	$ 1,036	$ 1,036
Funds payable to customers	2,528	2,528	2,393	2,393
Amounts payable due to credit and debit card transactions	437	437	341	341
Salaries and social security payable	249	249	230	230
Loans payable and other financial liabilities (*)	4,440	4,307	3,518	3,534
Other liabilities	117	117	117	117
Total Liabilities	$ 8,902	$ 8,769	$ 7,635	$ 7,651

(*) The fair value of the 2028 Notes (including the conversion option) is disclosed in Note 11.

As of June 30, 2022, the cost and the estimated fair value of the Company’s investment in corporate debt securities classified as available for sale were $55 million, all with an effective maturity of one year or less.

- 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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