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We did not experience any significant impact from changes in interest rates for the years ended
December 31, 2015, 2014 or 2013.
Foreign Exchange Risk
We conduct business in certain international markets, primarily in Australia, Canada, China and the
European Union. Because we operate in international markets, we have exposure to different economic climates,
political arenas, tax systems and regulations that could affect foreign exchange rates. Our primary exposure to
foreign currency risk relates to transacting in foreign currency and recording the activity in U.S. dollars. Changes
in exchange rates between the U.S. dollar and these other currencies will result in transaction gains or losses,
which we recognize in our consolidated statements of operations.
To the extent practicable, we minimize our foreign currency exposures by maintaining natural hedges
between our current assets and current liabilities in similarly denominated foreign currencies. Additionally, we
use foreign currency forward contracts to economically hedge certain merchant revenue exposures and in lieu of
holding certain foreign currency cash for the purpose of economically hedging our foreign currency-denominated
operating liabilities. These instruments are typically short-term and are recorded at fair value with gains and
losses recorded in other, net. As of December 31, 2015 and 2014, we had a net forward asset of $8 million and $9
million included in prepaid expenses and other current assets. We may enter into additional foreign exchange
derivative contracts or other economic hedges in the future. Our goal in managing our foreign exchange risk is to
reduce to the extent practicable our potential exposure to the changes that exchange rates might have on our
earnings, cash flows and financial position. We make a number of estimates in conducting hedging activities
including in some cases the level of future bookings, cancellations, refunds, customer stay patterns and payments
in foreign currencies. In the event those estimates differ significantly from actual results, we could experience
greater volatility as a result of our hedges.
In June 2015, we issued Euro 650 million of registered senior unsecured notes that are due in June 2022 and
bear interest at 2.5%. The aggregate principal value of the 2.5% Notes is designated as a hedge of our net
investment in certain Euro functional currency subsidiaries. The notes are measured at Euro to U.S. Dollar
exchange rates at each balance sheet date and transaction gains or losses due to changes in rates are recorded in
accumulated other comprehensive income (loss). The Euro-denominated net assets of these subsidiaries are
translated into U.S. Dollars at each balance sheet date, with effects of foreign currency changes also reported in
accumulated other comprehensive income (loss). Since the notional amount of the recorded Euro-denominated
debt is less than the notional amount of our net investment, we do not expect to incur any ineffectiveness on this
hedge.
Future net transaction gains and losses are inherently difficult to predict as they are reliant on how the
multiple currencies in which we transact fluctuate in relation to the U.S. dollar, the relative composition and
denomination of current assets and liabilities each period, and our effectiveness at forecasting and managing,
through balance sheet netting or the use of derivative contracts, such exposures. As an example, if the foreign
currencies in which we hold net asset balances were to all weaken 10% against the U.S. dollar and foreign
currencies in which we hold net liability balances were to all strengthen 10% against the U.S. dollar, we would
recognize foreign exchange losses of approximately $17 million based on our foreign currency forward positions
(including the impact of forward positions economically hedging our merchant revenue exposures) and the net
asset or liability balances of our foreign denominated cash and cash equivalents, accounts receivable, deferred
merchant bookings and merchant accounts payable balances as of December 31, 2015. As the net composition of
these balances fluctuate frequently, even daily, as do foreign exchange rates, the example loss could be
compounded or reduced significantly within a given period.
During 2015, 2014 and 2013, we recorded net foreign exchange rate gains of approximately $25 million
($15 million loss excluding the contracts economically hedging our forecasted merchant revenue), $6 million
($14 million loss excluding the contracts economically hedging our forecasted merchant revenue) and $1 million
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