Google 2008 Annual Report Download - page 99

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Google Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis
for considering such assumptions, SFAS 157 establishes a three-tier value hierarchy, which prioritizes the inputs
used in the valuation methodologies in measuring fair value:
Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active
markets.
Level 2—Include other inputs that are directly or indirectly observable in the marketplace.
Level 3—Unobservable inputs which are supported by little or no market activity.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use
of unobservable inputs when measuring fair value.
In accordance with SFAS 157, we measure our cash equivalents, marketable securities, auction rate securities
and foreign currency derivative contracts at fair value. Our cash equivalents and marketable securities are
classified within Level 1 or Level 2. This is because our cash equivalents and marketable securities are valued using
quoted market prices or alternative pricing sources and models utilizing market observable inputs. Our
investments in auction rate securities and AOL are classified within Level 3 because they are valued using
valuation techniques (see Note 3). Some of the inputs to these models are unobservable in the market and are
significant. Our foreign currency derivative contracts are classified within Level 2 as the valuation inputs are based
on quoted prices and market observable data of similar instruments.
Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):
Fair value measurement at reporting date using
Description December 31,
2008
Quoted Prices in Active
Markets for Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Assets
Cash equivalents:
Municipal securities ...... $ 14,250 $ — $ 14,250 $ —
Time deposits ........... 3,015,557 — 3,015,557 —
Money market mutual
funds ................ 2,296,207 2,296,207 — —
Marketable securities:
U.S. government
agencies ............. 3,342,406 — 3,342,406 —
Municipal securities ...... 2,721,603 — 2,721,603 —
Money market mutual
funds ................ 73,034 — 73,034 —
Corporate debt
securities ............ 907,056 — 907,056 —
Marketable equity
securities ............ 145,000 145,000 — —
Foreign currency derivative
contracts ................. 464,993 — 464,993 —
Auction rate securities ........ 197,361 — — 197,361
Total assets ............... $13,177,467 $ 2,441,207 $10,538,899 $197,361
Liabilities
Foreign currency
derivative contracts . . . $ 877 $ — $ 877 $ —
Total liabilities ............. $ 877 $ — $ 877 $ —
83