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Financial Instruments and Fair Value Measurements | 3 Months Ended
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Mar. 31, 2021
Investments All Other Investments [Abstract] |
Financial Instruments and Fair Value Measurements | NOTE 4: FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS For assets and liabilities required to be reported at fair value, GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels: Level 1—Valuations are based on quoted market prices for identical assets and liabilities in active markets. Level 2—Valuations are based on observable inputs other than quoted market prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. Level 3—Valuations are based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment. We had no material financial assets or liabilities measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020. Cash and Cash Equivalents As of March 31, 2021 and December 31, 2020, we had $674 million and $418 million, respectively, of cash and cash equivalents, which consisted of available on demand cash deposits in global financial institutions. We generally classify cash equivalents and marketable securities, if any, within Level 1 and Level 2 as we value these financial instruments using quoted market prices (Level 1) or alternative pricing sources (Level 2). The valuation technique we use to measure the fair value of money market funds is derived from quoted prices in active markets for identical assets or liabilities. Fair values for Level 2 investments are considered “Level 2” valuations because they are obtained from independent pricing sources for identical or comparable instruments, rather than direct observations of quoted prices in active markets. Our procedures include controls to ensure that appropriate fair values are recorded, including comparing the fair values obtained from our independent pricing services against fair values obtained from another independent source. Derivative Financial Instruments We generally use forward contracts to reduce the effects of foreign currency exchange rate fluctuations on our cash flows primarily for the Euro versus the U.S. Dollar. For the three months ended March 31, 2021 and 2020, our forward contracts have not been designated as hedges and generally had maturities of less than 90 days. Our outstanding or unsettled forward contracts are carried at fair value on our unaudited condensed consolidated balance sheets at March 31, 2021 and December 31, 2020. We measure the fair value of our outstanding or unsettled derivatives using Level 2 fair value inputs, as we use a pricing model that takes into account the contract terms as well as current foreign currency exchange rates in active markets. We recognize any gain or loss resulting from the change in fair value of our foreign currency forward contracts in other income (expense), net on our unaudited condensed consolidated statement of operations, which was not material for the three months ended March 31, 2021. For the three months ended March 31, 2020, we recorded a net gain of $1 million related to our forward contracts. The following table shows the net notional principal amounts of our outstanding derivative instruments as of the periods presented:
| March 31, 2021 |  | December 31, 2020 |
| (in millions) |
Foreign currency exchange-forward contracts (1) (2) | $ | 9 |  | $ | 3 |
(1) | Derivative contracts address foreign currency exchange fluctuations for the Euro versus the U.S. dollar. These outstanding derivatives are not designated as hedging instruments and have an original maturity period of 90 days or less.
(2) | The fair value of our outstanding derivatives as of March 31, 2021 and December 31, 2020, respectively, was not material. The notional amount of a forward contract is the contracted amount of foreign currency to be exchanged and is not recorded on the balance sheet.
Counterparties to our outstanding forward contracts consist of major global financial institutions. We monitor our positions and the credit ratings of the counterparties involved and, by policy limits, the amount of credit exposure to any one party. We do not use derivatives for trading or speculative purposes. We did not enter into any cash flow, fair value or net investment hedges as of March 31, 2021 or December 31, 2020. Other Financial Assets and Liabilities As of March 31, 2021 and December 31, 2020, financial instruments not measured at fair value on a recurring basis including accounts payable, accrued expenses and other current liabilities, and deferred merchant bookings, were carried at cost on our unaudited condensed consolidated balance sheets, which approximates their fair values because of the short-term nature of these items. Accounts receivable and contract assets, on our unaudited condensed consolidated balance sheets, as well as certain other financial assets, were measured at amortized cost and are carried at cost less an allowance for expected credit losses to present the net amount expected to be collected. The following table shows the aggregate principal and fair value amount of our outstanding 2025 Senior Notes and 2026 Senior Notes as of the periods presented, classified as long-term debt on our unaudited condensed consolidated balance sheets, and was considered Level 2 fair value measurements. Refer to “Note 5: Debt” for additional information on our 2025 Senior Notes and 2026 Senior Notes.
| March 31, 2021 |  | December 31, 2020 |
| (in millions) |
2025 Senior Notes |  |  |  |  |  |
Aggregate principal amount | $ | 500 |  | $ | 500 |
Carrying value amount (1) |  | 492 |  |  | 491 |
Fair value amount (2) |  | 541 |  |  | 542 |
2026 Senior Notes |  |  |  |  |  |
Aggregate principal amount | $ | 345 |  | $ | — |
Carrying value amount (3) |  | 339 |  |  | — |
Fair value amount (2) |  | 364 |  |  | — |
| (1) | Net of $8 million and $9 million of unamortized debt issuance costs as of March 31, 2021 and December 31, 2020, respectively.
| (2) | We estimate the fair value of our outstanding 2025 Senior Notes and 2026 Senior Notes based on recently reported market transactions and/or prices for identical or similar financial instruments obtained from a third-party pricing source.
| (3) | Net of $6 million in unamortized debt issuance costs.
Risks and Concentrations In addition to the impact of COVID-19, which is discussed in “Note 1: Business Description and Basis of Presentation”, our business is subject to certain financial risks and concentrations, including concentration related to dependence on our relationships with our customers. For the year ended December 31, 2020, our two most significant travel partners, Expedia (and its subsidiaries) and Booking (and its subsidiaries), each accounted for 10% or more of our consolidated revenue and combined accounted for 25% of our consolidated revenue, with nearly all of this revenue concentrated in our Hotels, Media & Platform segment. Financial instruments, which potentially subject us to concentration of credit risk, generally consist, at any point in time, primarily of cash and cash equivalents, corporate debt securities, forward contracts, capped calls, and accounts receivable. We maintain cash and cash equivalents balances with financial institutions that are in excess of Federal Deposit Insurance Corporation insurance limits. Our cash and cash equivalents are primarily composed of bank account balances with financial institutions primarily denominated in U.S. dollars, Euros, British pounds, and Australian dollars. We invest in highly-rated corporate debt securities, and our investment policy limits the amount of credit exposure to any one issuer, industry group and currency. Our credit risk related to corporate debt securities, if any, is also mitigated by the relatively short maturity period required by our investment policy. Forward contracts and capped calls are transacted with major international financial institutions with high credit standings. Forward contracts typically have maturities of less than 90 days which also mitigates credit risk. Our overall credit risk related to accounts receivable is mitigated by the relatively short collection period. Assets Measured at Fair Value on a Non-recurring Basis Non-Marketable Investments Equity Securities Accounted for under the Equity Method The Company owns a 40% equity investment in Chelsea Investment Holding Company PTE Ltd, which is majority owned by Ctrip Investment Holding Ltd, a majority-owned subsidiary of Trip.com Group Limited. The Company accounts for this minority investment under the equity method, given it has the ability to exercise significant influence, but not control, over the investee. The carrying value of this minority investment was $37 million and $38 million as of March 31, 2021 and December 31, 2020, respectively, and is included in non-marketable investments on our unaudited condensed consolidated balance sheets. During both the three months ended March 31, 2021 and 2020, we recognized $1 million, representing our share of the investee’s net loss in other income (expenses), net within the unaudited condensed consolidated statements of operations. The Company evaluates this investment for impairment when factors indicate that a decline in the value of its investment has occurred and the carrying amount of its investment may not be recoverable. An impairment loss, based on the excess of the carrying value over the estimated fair value of the investment based on Level 3 inputs, is recognized in earnings when an impairment is deemed to be other than temporary. During both the three months ended March 31, 2021 and 2020, we did not record any impairment loss on this equity investment. The Company maintains various commercial agreements with Chelsea Investment Holding Company PTE Ltd. and/or its subsidiaries. Transactions under these agreements are considered related-party transactions, and were not material during the three months ended March 31, 2021 and 2020. Other Long-Term Assets The Company holds collateralized notes (the “Notes Receivable”) with a total principal amount of $20 million from a privately-held company. The Company has classified the Notes Receivable as held-to-maturity, as the Company has concluded it has the positive intent and ability to hold the Notes Receivable until maturity, with 50% due in 5 years and the remaining 50% due in 10 years from issuance date. As of March 31, 2021 and December 31, 2020, the carrying value of the Notes Receivable was $14 million, net of accumulated allowance for credit losses, and is classified in other long-term assets, net on our unaudited condensed consolidated balance sheet at amortized cost. On a quarterly basis, we perform a qualitative assessment considering impairment indicators to evaluate whether the Notes Receivable are impaired and monitor for changes to our allowance for credit losses.

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- Definition The entire disclosure for financial instruments. This disclosure includes, but is not limited to, fair value measurements of short and long term marketable securities, international currencies forward contracts, and auction rate securities. Financial instruments may include hedging and non-hedging currency exchange instruments, derivatives, securitizations and securities available for sale at fair value. Also included are investment results, realized and unrealized gains and losses as well as impairments and risk management disclosures. + References No definition available. + Details
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