FAIR VALUE MEASUREMENTS

6 Months Ended

Dec. 31, 2024

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

The Company records certain of its financial assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. The accounting for fair value measurements must be applied to nonfinancial assets and nonfinancial liabilities that require initial measurement or remeasurement at fair value, which principally consist of assets and liabilities acquired through business combinations and goodwill, indefinite-lived intangible assets and long-lived assets for the purposes of calculating potential impairment. The Company is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are as follows:

Level 1:    Inputs based on quoted market prices for identical assets or liabilities in active markets at the measurement date.

Level 2:    Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3:    Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument’s valuation.

The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2024:

(In millions)	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	1,154	$	—	$	—	$	1,154
Foreign currency forward contracts	—		118		—		118
Cross-currency swap contracts	—		88		—		88
Total	$	1,154	$	206	$	—	$	1,360
Liabilities:
Foreign currency forward contracts	$	—	$	52	$	—	$	52
Interest rate contracts	—		138		—		138
Cross-currency swap contracts	—		8		—		8
Total	$	—	$	198	$	—	$	198

The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2024:

(In millions)	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	1,507	$	—	$	—	$	1,507
Foreign currency forward contracts	—		68		—		68
Cross-currency swap contracts	—		80		—		80
Total	$	1,507	$	148	$	—	$	1,655
Liabilities:
Foreign currency forward contracts	$	—	$	21	$	—	$	21
Interest rate contracts	—		145		—		145
Total	$	—	$	166	$	—	$	166

The estimated fair values of the Company’s financial instruments are as follows:

	December 31, 2024				June 30, 2024
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Nonderivatives
Cash and cash equivalents	$	2,586	$	2,586	$	3,395	$	3,395
Current and long-term debt	7,280		6,636		7,771		7,174
Deferred consideration payable	341		342		341		340
Derivatives
Foreign currency forward contracts – asset (liability), net	66		66		47		47
Cross-currency swap contracts - asset (liability), net	80		80		80		80
Interest rate contracts – liability	(138)		(138)		(145)		(145)

The following methods and assumptions were used to estimate the fair value of the Company’s financial instruments for which it is practicable to estimate that value:

Cash and cash equivalents – Cash and all highly-liquid securities with original maturities of three months or less are classified as cash and cash equivalents, primarily consisting of cash deposits in interest bearing accounts, time deposits and money market funds (classified within Level 1 of the valuation hierarchy). Cash deposits in interest bearing accounts and time deposits are carried at cost, which approximates fair value, due to the short maturity of cash equivalent instruments.

Foreign currency forward contracts – The fair values of the Company’s foreign currency forward contracts were determined using an industry-standard valuation model, which is based on an income approach. The significant observable inputs to the model, such as swap yield curves and currency spot and forward rates, were obtained from an independent pricing service. To determine the fair value of contracts under the model, the difference between the contract price and the current forward rate was discounted using SOFR forward curves.

Cross-currency swap contracts – The fair values of the Company’s cross-currency swap contracts were determined using an industry-standard valuation model, which is based on the income approach. The significant observable inputs to the model, such as yield curves and currency spot and forward rates, were obtained from independent pricing services.

Interest rate contracts – The fair values of the Company’s interest rate contracts were determined using an industry-standard valuation model, which is based on the income approach. The significant observable inputs to the model, such as treasury yield curves, swap yield curves and SOFR forward curves, were obtained from independent pricing services.

Current and long-term debt – The fair value of the Company’s debt was estimated based on the current rates offered to the Company for debt with the same remaining maturities. To a lesser extent, debt also includes finance lease obligations for which the carrying amount approximates the fair value. The Company’s debt is classified within Level 2 of the valuation hierarchy.

Deferred consideration payable – The deferred consideration payable consists primarily of deferred payments associated with the fiscal 2023 fourth quarter acquisition of TOM FORD. The fair value of the payments treated as deferred consideration payable are calculated based on the net present value of cash payments using an estimated borrowing rate based on quoted prices for a similar liability. The Company’s deferred consideration payable is classified within Level 2 of the valuation hierarchy.

Nonfinancial assets measured at fair value on a nonrecurring basis

In connection with its interim goodwill and other indefinite-lived intangible asset impairment testing, the Company has measured certain nonfinancial assets at fair value on a nonrecurring basis, classified as Level 3 of the fair value hierarchy. Refer to Note 2 – Goodwill and Other Intangible Assets for discussion of the valuation techniques used to measure fair value, the description of the inputs and information used to develop those inputs.