FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES

9 Months Ended

Sep. 30, 2022

FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES

FINANCIAL ASSETS AND LIABILITIES MEASURED AND RECORDED AT FAIR VALUE ON A RECURRING BASIS

The following tables summarize our financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021:


	September 30, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
	(In millions)
Assets:
Cash and cash equivalents(1)	$	893	$	—	$	893
Short-term investments(2):

U.S. government and agency securities	72		—		72
Foreign government and agency securities	467		—		467
Corporate debt securities	955		—		955
Asset-backed securities	513		—		513
Commercial paper	1,779		—		1,779

Total short-term investments	3,786		—		3,786
Funds receivable and customer accounts(3):
Cash and cash equivalents	400		—		400
U.S. government and agency securities	9,410		—		9,410
Foreign government and agency securities	2,290		—		2,290
Corporate debt securities	1,748		—		1,748
Asset-backed securities	1,343		—		1,343
Municipal securities	324		—		324
Commercial paper	3,801		—		3,801
Total funds receivable and customer accounts	19,316		—		19,316
Derivatives	1,015		—		1,015
Crypto asset safeguarding asset	690		—		690
Long-term investments(2),(4):
U.S. government and agency securities	454		—		454
Foreign government and agency securities	376		—		376
Corporate debt securities	1,006		—		1,006
Asset-backed securities	1,076		—		1,076
Marketable equity securities	361		361		—
Total long-term investments	3,273		361		2,912
Total financial assets	$	28,973	$	361	$	28,612
Liabilities:
Derivatives	$	187	$	—	$	187
Crypto asset safeguarding liability	690		—		690
Total financial liabilities	$	877	$	—	$	877

(1) Excludes cash of $5.8 billion not measured and recorded at fair value.

(2) Excludes restricted cash of $21 million and time deposits of $438 million not measured and recorded at fair value.

(3) Excludes cash, time deposits, and funds receivable of $15.5 billion underlying funds receivable and customer accounts not measured and recorded at fair value.

(4) Excludes non-marketable equity securities of $1.9 billion measured using the Measurement Alternative or equity method accounting.


	December 31, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
	(In millions)
Assets:
Cash and cash equivalents(1)	$	400	$	—	$	400
Short-term investments(2):
U.S. government and agency securities	537		—		537
Foreign government and agency securities	505		—		505
Corporate debt securities	2,285		—		2,285
Asset-backed securities	277		—		277

Total short-term investments	3,604		—		3,604
Funds receivable and customer accounts(3):
Cash and cash equivalents	622		—		622
U.S. government and agency securities	8,723		—		8,723
Foreign government and agency securities	4,090		—		4,090
Corporate debt securities	3,439		—		3,439
Asset-backed securities	1,549		—		1,549
Municipal securities	535		—		535

Total funds receivable and customer accounts	18,958		—		18,958
Derivatives	304		—		304
Long-term investments(2), (4):
U.S. government and agency securities	562		—		562
Foreign government and agency securities	736		—		736
Corporate debt securities	1,434		—		1,434
Asset-backed securities	813		—		813
Marketable equity securities	1,860		1,860		—
Total long-term investments	5,405		1,860		3,545
Total financial assets	$	28,671	$	1,860	$	26,811
Liabilities:
Derivatives	$	130	$	—	$	130

(1) Excludes cash of $4.8 billion not measured and recorded at fair value.

(2) Excludes restricted cash of $109 million and time deposits of $635 million not measured and recorded at fair value.

(3) Excludes cash, time deposits, and funds receivable of $17.2 billion underlying funds receivable and customer accounts not measured and recorded at fair value.

(4) Excludes non-marketable equity securities of $1.3 billion measured using the Measurement Alternative or equity method accounting.

Our marketable equity securities are valued using quoted prices for identical assets in active markets (Level 1). There are no active markets for our crypto asset safeguarding liability or the corresponding safeguarding asset. Accordingly, we have valued the asset and liability using quoted prices on the active exchange that has been identified as the principal market for the underlying crypto assets (Level 2). All other financial assets and liabilities are valued using quoted prices for identical instruments in less active markets, readily available pricing sources for comparable instruments, or models using market observable inputs (Level 2).

A majority of our derivative instruments are valued using pricing models that take into account the contract terms as well as multiple inputs where applicable, such as currency rates, interest rate yield curves, option volatility, and equity prices. Our derivative instruments are primarily short-term in nature, generally one month to one year in duration. Certain foreign currency contracts designated as cash flow hedges may have a duration of up to 18 months.

As of September 30, 2022 and December 31, 2021, we did not have any assets or liabilities requiring measurement at fair value without observable market values that would require a high level of judgment to determine fair value (Level 3).

We elect to account for available-for-sale debt securities denominated in currencies other than the functional currency of our subsidiaries under the fair value option. Election of the fair value option allows us to recognize any gains and losses from fair value changes on such investments in other income (expense), net on the condensed consolidated statements of income (loss) to significantly reduce the accounting asymmetry that would otherwise arise when recognizing the corresponding foreign exchange gains and losses relating to customer liabilities. The following table summarizes the estimated fair value of our available-for-sale debt securities under the fair value option as of September 30, 2022 and December 31, 2021:


	September 30, 2022		December 31, 2021
	(In millions)
Funds receivable and customer accounts	$	847	$	2,327
Short-term investments	$	—	$	13

The following table summarizes the gains (losses) from fair value changes recognized in other income (expense), net related to the available-for-sale debt securities under the fair value option for the three and nine months ended September 30, 2022 and 2021:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(In millions)
Funds receivable and customer accounts	$	(70)	$	(45)	$	(213)	$	(85)
Short-term investments	$	—	$	(18)	$	—	$	(25)

ASSETS MEASURED AND RECORDED AT FAIR VALUE ON A NON-RECURRING BASIS

The following tables summarize our assets held as of September 30, 2022 and December 31, 2021 for which a non-recurring fair value measurement was recorded during the nine months ended September 30, 2022 and the year ended December 31, 2021, respectively:


	September 30, 2022		Significant Other Observable Inputs (Level 2)
	(In millions)
Non-marketable equity investments measured using the Measurement Alternative(1)	$	1,054	$	1,054
Other assets(2)	128		128
Total	$	1,182	$	1,182

(1) Excludes non-marketable equity investments of $711 million accounted for under the Measurement Alternative for which no observable price changes occurred during the nine months ended September 30, 2022.

(2) Consists of ROU lease assets recorded at fair value pursuant to impairment charges that occurred during the nine months ended September 30, 2022. See “Note 6—Leases” for additional information.


	December 31, 2021		Significant Other Observable Inputs (Level 2)
	(In millions)
Non-marketable equity investments measured using the Measurement Alternative(1)	$	611	$	611
Other assets(2)	86		86
Total	$	697	$	697

(1) Excludes non-marketable equity investments of $657 million accounted for under the Measurement Alternative for which no observable price changes occurred during the year ended December 31, 2021.

(2) Consists of ROU lease assets recorded at fair value pursuant to impairment charges that occurred during the year ended December 31, 2021. See “Note 6—Leases” for additional information.

We measure the non-marketable equity investments accounted for under the Measurement Alternative at cost minus impairment, if any, adjusted for observable price changes in orderly transactions for an identical or similar investment in the same issuer. Impairment losses on ROU lease assets related to office operating leases are calculated initially using estimated rental income per square foot derived from observable market data.

FINANCIAL ASSETS AND LIABILITIES NOT MEASURED AND RECORDED AT FAIR VALUE

Our financial instruments, including cash, restricted cash, time deposits, loans and interest receivable, net, certain customer accounts, and long-term debt related to borrowings on our credit facilities, are carried at amortized cost, which approximates their fair value. Our notes receivable had a carrying value of approximately $404 million and fair value of approximately $337 million as of September 30, 2022. Our notes receivable had a carrying value of approximately $381 million and fair value of approximately $424 million as of December 31, 2021. Our long-term debt (including current portion) in the form of fixed rate notes had a carrying value of approximately $10.3 billion and fair value of approximately $9.2 billion as of September 30, 2022. Our fixed rate notes had a carrying value of approximately $9.0 billion and fair value of approximately $9.3 billion as of December 31, 2021.

If these financial instruments were measured at fair value in the financial statements, cash would be classified as Level 1; restricted cash, time deposits, certain customer accounts, and long-term debt (including current portion) would be classified as Level 2; and the remaining financial instruments would be classified as Level 3 in the fair value hierarchy.

- 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 + Details