Fair Value Measurements and Investments

12 Months Ended

Sep. 30, 2022

Note 6—Fair Value Measurements and Investments

The Company measures certain assets and liabilities at fair value. See Note 1—Summary of Significant Accounting Policies.

Assets and Liabilities Measured at Fair Value on a Recurring Basis


	Fair Value Measurements at September 30 Using Inputs Considered as
	Level 1				Level 2
	2022		2021		2022		2021
	(in millions)
Assets
Cash equivalents and restricted cash equivalents:
Money market funds	$	11,736	$	11,779	$	—	$	—
U.S. government-sponsored debt securities	—		—		—		100
U.S. Treasury securities	799		2,400		—		—
Investment securities:
Marketable equity securities	437		490		—		—
U.S. government-sponsored debt securities	—		—		457		245
U.S. Treasury securities	4,005		2,985		—		—
Other current and non-current assets:
Money market funds	22		4		—		—
Derivative instruments	—		—		1,131		410
Total	$	16,999	$	17,658	$	1,588	$	755
Liabilities
Accrued compensation and benefits:
Deferred compensation liability	$	146	$	167	$	—	$	—
Accrued and other liabilities:
Derivative instruments	—		—		418		109
Total	$	146	$	167	$	418	$	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

The amortized cost, unrealized gains and losses and fair value of debt securities were as follows:


	September 30, 2022
	Amortized Cost		Gross Unrealized				Fair Value
			Gains		Losses
	(in millions)
U.S. government-sponsored debt securities	$	458	$	—	$	(1)	$	457
U.S. Treasury securities	4,937		—		(133)		4,804
Total	$	5,395	$	—	$	(134)	$	5,261

As of September 30, 2021, gross unrealized gains and losses were not material.

Debt securities with continuous unrealized losses for less than 12 months were as follows:


	September 30, 2022
	Fair Value		Gross Unrealized Losses
	(in millions)
U.S. government-sponsored debt securities	$	408	$	(1)
U.S. Treasury securities	3,507		(133)
Total	$	3,915	$	(134)

The unrealized losses were primarily attributable to changes in interest rates.

The stated maturities of debt securities were as follows:


	September 30, 2022
	(in millions)
Due within one year	$	3,125
Due after 1 year through 5 years	2,136
Total	$	5,261

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 September 30, 2022 including cumulative unrealized gains and losses:


	September 30, 2022
	(in millions)
Initial cost basis	$	734
Adjustments:
Upward adjustments	810
Downward adjustments (including impairment)	(349)
Carrying amount, end of period	$	1,195

Unrealized gains and losses included in the carrying value of the Company’s non-marketable equity securities still held as of September 30, 2022 and 2021 were as follows:


	For the Years Ended September 30,
	2022		2021
	(in millions)
Upward adjustments	$	231	$	484
Downward adjustments (including impairment)	$	(341)	$	(3)

Investment Income (Expense)

Investment income (expense) is recorded as non-operating income (expense) in the Company’s consolidated statements of operations and consisted of the following:


	For the Years Ended September 30,
	2022		2021		2020
	(in millions)
Interest and dividend income on cash and investments	$	69	$	(16)	$	80
Realized gains (losses), net on debt securities	—		—		4
Equity securities:
Unrealized gains (losses), net	(364)		721		115
Realized gains (losses), net	68		26		1
Investment income (expense)	$	(227)	$	731	$	200

Other Fair Value Disclosures

Debt. Debt instruments are measured at amortized cost on the Company’s 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 September 30, 2022, the carrying value and estimated fair value of debt was $22.5 billion and $19.9 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 September 30, 2022, the carrying values of settlement receivable and payable and customer collateral are an approximate 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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