Table of Contents WEWORK COMPANIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2019 (UNAUDITED) The valuation techniques used to measure the fair value of money market funds were derived from quoted market prices for identical instruments in active markets. The estimated fair value of the Company’s investment in convertible notes, included in equity method and other investments in the accompanying condensed consolidated balance sheets as of June 30, 2019, was estimated by discounting future anticipated cash flows using a discount rate which reflects the current interest rate at which a similar note with the same terms and maturities would be made to borrowers with similar credit ratings. See Note 13 for a discussion of the method for determining the estimated fair value of the Company’s convertible related party liabilities. Contingent Consideration—The fair value measurements of contingent consideration liabilities established in connection with business combinations are determined as of the acquisition date based on significant unobservable inputs, including the discount rate, the price of the Company’s stock, estimated probabilities and timing of achieving specified milestones and the estimated amount of future sales. Contingent consideration liabilities are remeasured to fair value at each subsequent reporting date until the related contingency is resolved. Changes to the fair value of the contingent consideration liabilities can result from changes to one or a number of inputs, including discount rates, the probabilities of achieving the milestones, the time required to achieve the milestones and estimated future sales. Significant judgment is employed in determining the appropriateness of these inputs. Changes to the inputs described above could have a material impact on the Company’s financial position and results of operations in any given period. Income Taxes—The Company calculates its quarterly income tax provision pursuant to Accounting Standard Codification (“ASC”) 740-270, which provides that a Company cannot recognize a tax benefit in its annual effective tax rate for any jurisdiction with a pre-tax book loss and full valuation allowance (“excluded jurisdictions”). For the six months ended June 30, 2018, the Company recorded an income tax benefit of $1.4 million, resulting in an effective tax rate of (0.19)%. For the six months ended June 30, 2019, the Company recorded an income tax provision of $(5.1) million, resulting in an effective tax rate of 0.57%. As of December 31, 2018 and June 30, 2019, the Company had deferred income tax liabilities totaling $2.6 million and $2.4 million, respectively, included within other liabilities on the accompanying condensed consolidated balance sheets. The Company analyzed its various tax positions and did not identify any material uncertain tax positions for the six months ended June 30, 2018 and 2019. The Company files income tax returns in U.S. federal, U.S. state and foreign jurisdictions. All tax years remain open to examination by the taxing authorities. Recently Adopted Accounting Pronouncements In June 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). This guidance expands the scope of ASC 718 to include share- based payments granted to non-employees in exchange for goods or services used or consumed in an entity’s own operations and supersedes the guidance in ASC 505-50. The guidance also applies to awards granted by an investor to employees and non-employees of an equity method investee for goods or services used or consumed in the investee’s operations. This guidance is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. For all other companies, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than a company’s adoption date of ASC 606. As of January 1, 2019, the Company early adopted the provisions of ASU 2018-07, concurrent with the adoption of ASC 606. The adoption of this guidance did not have material impact on the Company’s condensed consolidated financial position, results of operations and cash flows. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the Emerging Issues Task Force) (“ASU 2016-18”) to add and clarify guidance on the classification and F-79