Priceline 2015 Annual Report Download - page 103

Derivatives are considered "Level 2 " fair value measurements. The Company's derivative instruments are typically short-term in nature.
As of December 31, 2015 and 2014 , the Company's cash consisted of bank deposits and cash held in investment accounts. Other financial assets and
liabilities, including restricted cash, accounts receivable, accounts payable, accrued expenses and deferred merchant bookings are carried at cost which
approximates their fair value because of the short-term nature of these items. As of December 31, 2015 , the Company held investments in equity securities of
private companies of approximately $62.3 million and these investments are accounted for under the cost method of accounting (see Note 4 ). See Note 4 for
information on the carrying value of investments and Note 10 for the estimated fair value of the Company's outstanding Senior Notes. See Note 19 for the
Company's contingent liabilities associated with business acquisitions.
In the normal course of business, the Company is exposed to the impact of foreign currency fluctuations. The Company limits these risks by following
established risk management policies and procedures, including the use of derivatives. See Note 2 for further information on our accounting policy for derivative
financial instruments.
Derivatives Not Designated as Hedging Instruments — The Company is exposed to adverse movements in currency exchange rates as the operating
results of its international operations are translated from local currency into U.S. Dollars upon consolidation. The Company's derivative contracts principally
address short-term foreign exchange fluctuations for the Euro and British Pound Sterling versus the U.S. Dollar. As of December 31, 2015 and 2014 , there were
no outstanding derivative contracts related to foreign currency translation risk. Foreign exchange losses of $6.6 million for the year ended December 31, 2015 , and
foreign exchange gains of $13.7 million and $0.3 million for the years ended December 31, 2014 and 2013 , respectively, were recorded related to these derivatives
in "Foreign currency transactions and other" in the Consolidated Statements of Operations.
The Company also enters into foreign currency forward contracts to hedge its exposure to the impact of movements in currency exchange rates on its
transactional balances denominated in currencies other than the functional currency. Foreign exchange derivatives outstanding as of December 31, 2015 associated
with foreign currency transaction risks resulted in a net liability of $0.3 million , with a liability in the amount of $0.7 million recorded in "Accrued expenses and
other current liabilities" and an asset in the amount of $0.4 million recorded in "Prepaid expenses and other current assets" in the Consolidated Balance Sheet.
Foreign exchange derivatives outstanding as of December 31, 2014 associated with foreign exchange transaction risks resulted in a net asset of $0.2 million , with
an asset in the amount of $0.3 million recorded in "Prepaid expense and other current assets" and a liability in the amount of $0.1 million recorded in "Accrued
expenses and other current liabilities" in the Consolidated Balance Sheet. Derivatives associated with these transaction risks resulted in foreign exchange losses of
$15.3 million and $21.8 million for the years ended December 31, 2015 and 2014 , respectively, and foreign exchange gains of $3.6 million for the year ended
December 31, 2013 . These mark-to-market adjustments on the derivative contracts, offset by the effect of changes in currency exchange rates on transactions
denominated in currencies other than the functional currency, resulted in net losses of $13.8 million , $11.8 million and $5.5 million for the years ended
December 31, 2015 , 2014 and 2013 , respectively. These net impacts are reported in “Foreign currency transactions and other” in the Consolidated Statements of
Operations.
The settlement of derivative contracts not designated as hedging instruments resulted in net cash outflows of $33.9 million and $8.9 million for the years
ended December 31, 2015 and 2014 , respectively, and a net cash inflow of $4.4 million for the year ended December 31, 2013 , respectively, and were reported
within "Net cash provided by operating activities" in the Consolidated Statements of Cash Flows.
Derivatives Designated as Hedging Instruments — The Company had no foreign currency forward contracts designated as hedges of its net investment in
a foreign subsidiary outstanding as of December 31, 2015 and 2014 . A net cash inflow of $5.2 million for the year ended December 31, 2015 and net cash
outflows of $80.3 million and $78.6 million for the years ended December 31, 2014 and 2013 , respectively, were reported within " Net cash used in investing
activities " in the Consolidated Statements of Cash Flows.
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