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Fair Value Measurements and Investments

9 Months Ended

Jun. 30, 2021

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, 2021		September 30, 2020		June 30, 2021		September 30, 2020
	(in millions)
Assets
Cash equivalents and restricted cash equivalents:
Money market funds	$	14,830	$	12,522	$	—	$	—
U.S. government-sponsored debt securities	—		—		600		1,469
U.S. Treasury securities	750		650		—		—
Investment securities:
Marketable equity securities	550		148		—		—
U.S. government-sponsored debt securities	—		—		486		2,582
U.S. Treasury securities	1,271		1,253		—		—
Other current and non-current assets:
Money market funds	3		—		—		—
Derivative instruments	—		—		389		512
Total	$	17,404	$	14,573	$	1,475	$	4,563
Liabilities
Accrued compensation and benefits:
Deferred compensation liability	$	168	$	135	$	—	$	—
Accrued and other liabilities:
Derivative instruments	—		—		216		181
Total	$	168	$	135	$	216	$	181

Level 1 assets. Money market funds, marketable equity securities and U.S. Treasury 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 and liabilities. 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. As of June 30, 2021 and September 30, 2020, the Company held $1.8 billion and $3.8 billion of these available-for-sale investment securities, respectively. All of the Company’s long-term available-for-sale investment securities are due within one to five years.

Assets Measured at Fair Value on a Non-recurring Basis

Non-marketable equity securities. The Company’s non-marketable equity securities are investments in privately held companies without readily determinable market values. 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.

The following table summarizes the total carrying value of the Company’s non-marketable equity securities held as of June 30, 2021 including cumulative unrealized gains and losses:


	June 30, 2021
	(in millions)
Initial cost basis	$	857
Adjustments:
Upward adjustments	446
Downward adjustments (including impairment)	(13)
Carrying amount, end of period	$	1,290

During the three and nine months ended June 30, 2021 and 2020, unrealized gains and losses included in the carrying value of the Company’s non-marketable equity securities still held as of June 30, 2021 and 2020 were as follows:


	Three Months Ended June 30,				Nine Months Ended June 30,
	2021		2020		2021		2020
	(in millions)
Upward adjustments	$	180	$	56	$	323	$	65
Downward adjustments (including impairment)	$	—	$	(6)	$	(2)	$	(6)

The Company recognized net unrealized gains on marketable and non-marketable equity securities still held as of quarter end of $434 million and $68 million for the three months ended June 30, 2021 and 2020, respectively, and $610 million and $59 million for the nine months ended June 30, 2021 and 2020, respectively.

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 and trade names, 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, 2021, and concluded that there was no impairment. No recent events or changes in circumstances indicate that impairment existed at June 30, 2021.

Other Fair Value Disclosures

Debt. Debt instruments are measured at amortized cost on the Company’s unaudited 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, 2021, the carrying value and estimated fair value of debt was $21.0 billion and $22.9 billion, respectively. As of September 30, 2020, the carrying value and estimated fair value of debt was $24.1 billion and $26.6 billion, respectively.

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, 2021, but disclosure of their fair values is required: settlement receivable and payable and customer collateral. The estimated fair value of such instruments at June 30, 2021 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.

- 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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