Financial Instruments and Fair Value Measurements Financial Instruments and Fair Value Measurements (Policies)

9 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments, Policy

The Company measures the fair value of forward exchange contracts and interest rate swaps based upon the present value of expected future cash flows using market-based observable inputs including credit risk, interest rate yield curves, foreign currency spot prices and forward prices.

Long-term debt is recorded at amortized cost. The fair value of long-term debt is measured based upon quoted prices in active markets for similar instruments, which are considered Level 2 inputs in the fair value hierarchy. The fair value of long-term debt was $11.4 billion and $11.6 billion at June 30, 2016 and September 30, 2015, respectively. During the first and third quarters of fiscal year 2016, the Company reclassified $500 million of 1.750% notes due on November 8, 2016 and $300 million of 1.450% notes due on May 15, 2017, respectively, from Long-Term Debt to Short-term debt. The fair value of reclassified notes was $802 million and $750 million at June 30, 2016 and September 30, 2015, respectively. The balance of reclassified notes at September 30, 2015, which has been repaid, represented $750 million of floating rate notes due on June 15, 2016.

The contingent consideration liabilities were recognized as part of the consideration transferred by the Company for certain acquisitions. The fair values of the contingent consideration liabilities were estimated using probability-weighted discounted cash flow models that were based upon the probabilities assigned with regard to achievement of the contingent events. The estimated fair values of the contingent consideration liabilities are remeasured each reporting period based upon increases or decreases in the probability of the contingent payments. The change to the contingent consideration liability for the nine months ended June 30, 2016 primarily reflected a net decrease of $26 million, which was recorded in Selling and administrative expense, in the fair value of contingent consideration liabilities associated with certain product development milestones.

The Company’s policy is to recognize any transfers into fair value measurement hierarchy levels and transfers out of levels at the beginning of each reporting period.