Fair Value Measurements and Investments

6 Months Ended

Mar. 31, 2022

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
	March 31, 2022		September 30, 2021		March 31, 2022		September 30, 2021
	(in millions)
Assets
Cash equivalents and restricted cash equivalents:
Money market funds	$	9,448	$	11,779	$	—	$	—
U.S. government-sponsored debt securities	—		—		418		100
U.S. Treasury securities	200		2,400		—		—
Investment securities:
Marketable equity securities	363		490		—		—
U.S. government-sponsored debt securities	—		—		110		245
U.S. Treasury securities	3,043		2,985		—		—
Other current and non-current assets:
Money market funds	4		4		—		—
Derivative instruments	—		—		465		410
Total	$	13,058	$	17,658	$	993	$	755
Liabilities
Accrued compensation and benefits:
Deferred compensation liability	$	179	$	167	$	—	$	—
Accrued and other liabilities:
Derivative instruments	—		—		226		109
Total	$	179	$	167	$	226	$	109

Level 1 assets and liabilities. 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. 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 March 31, 2022 and September 30, 2021, gross unrealized gains and losses were not material. As of March 31, 2022, $1.5 billion of the Company’s debt securities are due within one year and $2.3 billion is due between 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 March 31, 2022 including cumulative unrealized gains and losses:


	March 31, 2022
	(in millions)
Initial cost basis	$	908
Adjustments:
Upward adjustments	806
Downward adjustments (including impairment)	(66)
Carrying amount, end of period	$	1,648

Unrealized gains and losses included in the carrying value of the Company’s non-marketable equity securities still held as of March 31, 2022 and 2021 were as follows:


	Three Months Ended March 31,				Six Months Ended March 31,
	2022		2021		2022		2021
	(in millions)
Upward adjustments	$	2	$	129	$	226	$	143
Downward adjustments (including impairment)	$	(53)	$	—	$	(53)	$	(2)

For the three months ended March 31, 2022 and 2021, the Company recognized net unrealized losses of $156 million, and net unrealized gains of $147 million, respectively, on marketable and non-marketable equity securities still held as of quarter end. For the six months ended March 31, 2022 and 2021, the Company recognized net unrealized gains of $16 million and $176 million, respectively, on marketable and non-marketable equity securities still held as of quarter end.

Non-financial assets and liabilities. Certain non-financial assets such as goodwill, intangible assets and property, equipment and technology are only recognized at fair value 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, 2022, and concluded there was no impairment as of that date. As of March 31, 2022, there were no impairment indicators.

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 March 31, 2022, the carrying value and estimated fair value of debt was $20.7 billion and $20.8 billion, respectively. As of September 30, 2021, the carrying value and estimated fair value of debt was $21.0 billion and $22.5 billion, respectively.

Other financial instruments not measured at fair value. At March 31, 2022, the carrying value of settlement receivable and payable, commercial paper and customer collateral approximates 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.

- 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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