Note 4—Fair Value Measurements and Investments

Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis



	Fair Value Measurements Using Inputs Considered as
	Level 1				Level 2				Level 3
	June 30, 2016		September 30, 2015		June 30, 2016		September 30, 2015		June 30, 2016		September 30, 2015
	(in millions)
Assets
Cash equivalents and restricted cash:
Money market funds	$	4,712	$	3,051
U.S. government-sponsored debt securities					$	80	$	280
Investment securities, trading:
Equity securities	69		66
Investment securities, available-for-sale:
U.S. Treasury securities	2,407		2,656
U.S. government-sponsored debt securities					3,836		2,615
Equity securities	41		4
Corporate debt securities					273		533
Auction rate securities									$	—	$	7
Prepaid and other current assets:
Foreign exchange derivative instruments					163		76
Other assets:
Foreign exchange derivative instruments					5		—
Total	$	7,229	$	5,777	$	4,357	$	3,504	$	—	$	7
Liabilities
Accrued liabilities:
Visa Europe put option									$	—	$	255
Foreign exchange derivative instruments					$	258	$	13
Other liabilities:
Foreign exchange derivative instruments					17		—
Total	$	—	$	—	$	275	$	13	$	—	$	255

There were no transfers between Level 1 and Level 2 assets during the nine months ended June 30, 2016 and 2015.

Level 1 assets measured at fair value on a recurring basis. Money market funds, publicly-traded equity securities and U.S. Treasury securities are classified as Level 1 within the fair value hierarchy, as fair value is based on quoted prices in active markets.

Level 2 assets and liabilities measured at fair value on a recurring basis. The fair value of U.S. government-sponsored debt securities and corporate debt securities, as provided by third-party pricing vendors, is based on quoted prices in active markets for similar, not identical, assets. The pricing data obtained from outside sources is reviewed internally for reasonableness, compared against benchmark quotes from independent pricing sources, then confirmed or revised accordingly. Foreign exchange derivative instruments are valued using inputs that are observable in the market or can be derived principally from or corroborated by observable market data. There were no substantive changes to the valuation techniques and related inputs used to measure fair value during the nine months ended June 30, 2016.

Level 3 assets and liabilities measured at fair value on a recurring basis. Auction rate securities were classified as Level 3 due to a lack of trading in active markets and a lack of observable inputs in measuring fair value.

Visa Europe put option agreement. On June 21, 2016, the Company acquired 100% of the share capital of Visa Europe, effected by the Visa Europe board of directors' exercise of the amended Visa Europe put option. Therefore, the Visa Europe put option was contractually terminated as a result of the transaction. During the first quarter of fiscal 2016, the Company recorded a $255 million non-cash decrease in the fair value of the put option as non-operating income in the Company's unaudited consolidated statements of operations, reducing the fair value of the liability to zero.

Assets Measured at Fair Value on a Non-recurring Basis

Non-marketable equity investments and investments accounted for under the equity method. These investments are classified as Level 3 due to the absence of quoted market prices, the inherent lack of liquidity, and the fact that inputs used to measure fair value are unobservable and require management's judgment. When certain events or circumstances indicate that impairment may exist, the Company revalues the investments using various assumptions, including the financial metrics and ratios of comparable public companies. There were no

significant impairments during the nine months ended June 30, 2016 or 2015. These investments totaled $45 million at June 30, 2016 and September 30, 2015 and are classified in other assets on the consolidated balance sheets.

Due to the completion of an initial public offering by one of the Company's investees during fiscal 2016, the Company reclassified equity securities previously accounted for as a cost method investment, with a carrying value of $4 million, to short-term available-for-sale investment securities. The fair value of this investment at June 30, 2016 was $38 million, resulting in the recognition of a pre-tax unrealized gain of $34 million in other comprehensive income.

Non-financial assets and liabilities. Long-lived assets such as goodwill, indefinite-lived intangible assets, finite-lived intangible assets, and property, equipment and technology are considered non-financial assets. The Company does not have any non-financial liabilities measured at fair value on a non-recurring basis. Finite-lived intangible assets primarily consist of customer relationships, trade names and reseller relationships, all of which were obtained through acquisitions.

If the Company were required to perform a quantitative assessment for impairment testing of goodwill and indefinite-lived intangible assets, the fair values would generally be estimated using an income approach. As the assumptions employed to measure these assets on a non-recurring basis are based on management's judgment using internal and external data, these fair value determinations are classified as Level 3 in the fair value hierarchy. The Company completed its annual impairment review of its indefinite-lived intangible assets and goodwill as of February 1, 2016, and concluded that there was no impairment. No recent events or changes in circumstances indicate that impairment existed at June 30, 2016.

Other Fair Value Disclosures

Long-term debt. In December 2015, the Company issued fixed-rate senior notes in an aggregate principal amount of $16.0 billion, with maturities ranging between 2 and 30 years. See Note 5—Debt. These debt instruments are measured at amortized cost on the Company's unaudited consolidated balance sheet at June 30, 2016. The fair value of these notes, as provided by third-party pricing vendors, is based on quoted prices in active markets for similar, not identical, assets. The pricing data obtained from outside sources is reviewed internally for reasonableness, compared against benchmark quotes from independent pricing sources, then confirmed or revised accordingly. If measured at fair value in the financial statements, these instruments would be classified as Level 2 in the fair value hierarchy.

The following table presents the carrying amount and estimated fair value of the Company’s debt in order of maturity:



	June 30, 2016
	Carrying Amount		Estimated Fair Value
	(in millions)
1.20% Senior Notes due December 2017	$	1,746	$	1,761
2.20% Senior Notes due December 2020	2,987		3,093
2.80% Senior Notes due December 2022	2,237		2,375
3.15% Senior Notes due December 2025	3,963		4,276
4.15% Senior Notes due December 2035	1,485		1,696
4.30% Senior Notes due December 2045	3,461		4,052
	$	15,879	$	17,253

Other financial instruments not measured at fair value. The following financial instruments are not measured at fair value on the Company's unaudited consolidated balance sheet at June 30, 2016, but require disclosure of their fair values: time deposits recorded in prepaid expenses and other current assets, settlement receivable and payable, and customer collateral. The estimated fair value of such instruments at June 30, 2016 approximates their carrying 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.

Investments

Available-for-sale investment securities. The Company had $46 million in gross unrealized gains and $1 million in gross unrealized losses at June 30, 2016. The unrealized gains were primarily related to the Company's reclassified equity investment discussed above. There were $7 million gross unrealized gains and no gross unrealized losses at September 30, 2015. A majority of the Company's available-for-sale investment securities with stated maturities are due within one to two years.