Table of Contents WEWORK COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2018 and is accounted for in the same manner as a freestanding derivative pursuant to ASC 815, Derivatives and Hedging, with subsequent changes in fair value recorded as additional interest expense each period. The fair value measurements of the debt discount and the embedded redemption features are considered to be Level 3 fair value measurements in the fair value hierarchy as per ASC 820, Fair Value Measurements, as they were determined using observable and unobservable inputs. During the year ended December 31, 2018, the Company recorded interest expense of $22.4 million which represents the imputed interest on the Convertible Note at an effective interest rate of 10.66% and also recorded interest expense of $97.6 million, which represents the change in fair value of the embedded redemption feature. In January 2019, the Company and SoftBank agreed to modify certain provisions of the Convertible Note. See Note 26 for additional details regarding this subsequent event. Note 14. Fair Value Measurements The Company’s assets and liabilities measured at fair value on a recurring basis consisted of the following: December 31, 2017 (Amounts in thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents — money market funds and time deposits $ 1,100,728 $ — $ — $ 1,100,728 Other investments — available-for-sale convertible notes — — 6,032 6,032 Total assets measured at fair value $ 1,100,728 $ — $ 6,032 $ 1,106,760 December 31, 2018 (Amounts in thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents — money market funds and time deposits $ 1,388,877 $ — $ — $ 1,388,877 Other investments — available-for-sale convertible notes — — 5,319 5,319 Total assets measured at fair value $ 1,388,877 $ — $ 5,319 $ 1,394,196 Liabilities: Other current liabilities — contingent consideration relating to acquisitions payable in stock $ — $ — $ 129,811 $ 129,811 Other current liabilities — contingent consideration relating to acquisitions payable in cash — — 10,520 10,520 Convertible related party liabilities — derivative liability related to Convertible Note — — 276,371 276,371 Total liabilities measured at fair value $ — $ — $ 416,702 $ 416,702 There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the years ended December 31, 2017 and 2018. F-38