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Fair Value Measurements and Investments

9 Months Ended

Jun. 30, 2023

Note 6—Fair Value Measurements and Investments

Assets and Liabilities Measured at Fair Value on a Recurring Basis


	Fair Value Measurements Using Inputs Considered as
	Level 1				Level 2
	June 30, 2023		September 30, 2022		June 30, 2023		September 30, 2022
	(in millions)
Assets
Cash equivalents and restricted cash equivalents:
Money market funds	$	12,605	$	11,736	$	—	$	—

U.S. Treasury securities	175		799		—		—
Investment securities:
Marketable equity securities	347		437		—		—
U.S. government-sponsored debt securities	—		—		1,153		457
U.S. Treasury securities	3,788		4,005		—		—
Other current and non-current assets:
Money market funds	23		22		—		—
Derivative instruments	—		—		197		1,131
Total	$	16,938	$	16,999	$	1,350	$	1,588
Liabilities
Accrued compensation and benefits:
Deferred compensation liability	$	181	$	146	$	—	$	—
Accrued and other liabilities:
Derivative instruments	—		—		482		418
Total	$	181	$	146	$	482	$	418

Level 1 assets and liabilities. Money market funds, U.S. Treasury securities and marketable equity securities are classified as Level 1 within the fair value hierarchy, as fair value is based on unadjusted quoted prices in active markets for identical assets. The Company’s deferred compensation liability is measured at fair value based on marketable equity securities held under the deferred compensation plan.

Level 2 assets and liabilities. The fair value of U.S. government-sponsored debt securities, as provided by third-party pricing vendors, is based on quoted prices in active markets for similar, not identical, assets. Derivative instruments are valued using inputs that are observable in the market or can be derived principally from or corroborated by observable market data.

U.S. Government-sponsored Debt Securities and U.S. Treasury Securities

The amortized cost, unrealized gains and losses and fair value of debt securities were as follows:


	June 30, 2023
	Amortized Cost		Gross Unrealized				Fair Value
			Gains		Losses
	(in millions)
U.S. government-sponsored debt securities	$	1,155	$	—	$	(2)	$	1,153
U.S. Treasury securities	4,062		—		(99)		3,963
Total	$	5,217	$	—	$	(101)	$	5,116


	September 30, 2022
	Amortized Cost		Gross Unrealized				Fair Value
			Gains		Losses
	(in millions)
U.S. government-sponsored debt securities	$	458	$	—	$	(1)	$	457
U.S. Treasury securities	4,937		—		(133)		4,804
Total	$	5,395	$	—	$	(134)	$	5,261

Debt securities with unrealized losses for less than 12 months and 12 months or greater were as follows:


	June 30, 2023
	Less Than 12 Months				12 Months or Greater
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(in millions)
U.S. government-sponsored debt securities	$	584	$	(2)	$	—	$	—
U.S. Treasury securities	1,524		(17)		2,165		(82)
Total	$	2,108	$	(19)	$	2,165	$	(82)


	September 30, 2022
	Less Than 12 Months
	Fair Value		Gross Unrealized Losses
	(in millions)
U.S. government-sponsored debt securities	$	408	$	(1)
U.S. Treasury securities	3,507		(133)
Total	$	3,915	$	(134)

The unrealized losses were primarily attributable to changes in interest rates.

The stated maturities of debt securities were as follows:


	June 30, 2023
	(in millions)
Due within one year	$	2,994
Due after 1 year through 5 years	2,122
Total	$	5,116

Equity Securities

The Company’s non-marketable equity securities are investments in privately held companies without readily determinable market values. These investments are measured at fair value on a non-recurring basis and are classified as Level 3 due to the absence of quoted market prices, the inherent lack of liquidity and the fact that significant inputs used to measure fair value are unobservable and require management’s judgment.

The following table summarizes the total carrying value of the Company’s non-marketable equity securities held as of June 30, 2023 including cumulative unrealized gains and losses:


	June 30, 2023
	(in millions)
Initial cost basis	$	764
Adjustments:
Upward adjustments	899
Downward adjustments (including impairment)	(431)
Carrying amount, end of period	$	1,232

Unrealized gains and losses included in the carrying value of the Company’s non-marketable equity securities still held as of June 30, 2023 and 2022 were as follows:


	Three Months Ended June 30,				Nine Months Ended June 30,
	2023		2022		2023		2022
	(in millions)
Upward adjustments	$	75	$	5	$	94	$	231
Downward adjustments (including impairment)	$	—	$	(284)	$	(86)	$	(337)

For the three months ended June 30, 2023 and 2022, the Company recognized net unrealized gains of $96 million and net unrealized losses of $278 million, respectively, on marketable and non-marketable equity securities still held as of quarter end. For the nine months ended June 30, 2023 and 2022, the Company recognized net unrealized losses of $85 million and $262 million, respectively, on marketable and non-marketable equity securities still held as of quarter end.

Other Fair Value Disclosures

Debt. Debt instruments are measured at amortized cost on the Company’s consolidated balance sheets. The fair value of the debt instruments, as provided by third-party pricing vendors, is based on quoted prices in active markets for similar, not identical, assets. If measured at fair value in the financial statements, these instruments would be classified as Level 2 in the fair value hierarchy. As of June 30, 2023, the carrying value and estimated fair value of debt was $20.6 billion and $18.6 billion, respectively. As of September 30, 2022, the carrying value and estimated fair value of debt was $22.5 billion and $19.9 billion, respectively.

Other financial instruments not measured at fair value. As of June 30, 2023, the carrying values of settlement receivable and payable and customer collateral are an approximate fair value due to their generally short maturities. If measured at fair value in the financial statements, these financial instruments would be classified as Level 2 in the fair value hierarchy.

Non-financial assets. Certain non-financial assets such as goodwill, intangible assets and property, equipment and technology are subject to non-recurring fair value measurements if they are deemed to be impaired. The Company performed its annual impairment review of its indefinite-lived intangible assets and goodwill as of February 1, 2023, and concluded there was no impairment as of that date. No recent events or changes in circumstances indicated that impairment existed as of June 30, 2023

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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