•	Level 1 — Quoted prices in active markets for identical assets or liabilities.

•

Level 2 — Observable inputs other than quoted prices included in Level 1. The Company could value assets and liabilities included in this level using dealer and broker quotations, certain pricing models, bid prices, quoted prices for similar assets and liabilities in active markets, or other inputs that are observable or can be corroborated by observable market data.

•

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. For the Company, this primarily includes the use of forecasted financial information and other valuation related assumptions such as discount rates and long term growth rates in the income approach as well as the market approach which utilizes certain market and transaction multiples.

Under ASC 820, certain assets and liabilities are required to be remeasured to fair value at the end of each reporting period.

The following table summarizes those assets and liabilities measured at fair value on a recurring basis:


	As of March 31, 2020								As of June 30, 2019
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in millions)
Assets:
Foreign currency derivatives - cash flow hedges	$	—	$	4	$	—	$	4	$	—	$	1	$	—	$	1
Cross currency interest rate derivatives - fair value hedges		—		30		—		30		—		29		—		29
Cross currency interest rate derivatives - economic hedges		—		—		—		—		—		12		—		12
Cross currency interest rate derivatives - cash flow hedges		—		120		—		120		—		116		—		116
Equity securities (a)		54		—		125		179		74		—		113		187

Total assets	$	54	$	154	$	125	$	333	$	74	$	158	$	113	$	345

Liabilities:
Interest rate derivatives - cash flow hedges		—		15		—		15		—		20		—		20
Mandatorily redeemable noncontrolling interests		—		—		—		—		—		—		11		11
Cross currency interest rate derivatives - cash flow hedges		—		17		—		17		—		18		—		18

Total liabilities	$	—	$	32	$	—	$	32	$	—	$	38	$	11	$	49

(a)	See Note 5 —Investments.

There have been no transfers between levels of the fair value hierarchy during the periods presented.

Equity securities

The fair values of equity securities with quoted prices in active markets are determined based on the closing price at the end of each reporting period. These securities are classified as Level 1 in the fair value hierarchy outlined above. The fair values of equity securities without readily determinable fair market values are determined based on cost, less any impairment, plus or minus changes in fair value resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. These securities are classified as Level 3 in the fair value hierarchy outlined above.

A rollforward of the Company’s equity securities classified as Level 3 is as follows:


	For the nine months ended March 31,
	2020			2019
	(in millions)
Balance - beginning of period (a)	$	113		$	127
Additions (b)		17			7
Sales		—			(10	)
Measurement adjustments		(3	)		—
Foreign exchange and other		(2	)		(9	)

Balance - end of period	$	125		$	115

(a)	As a result of the adoption of ASU 2016-01 during the first quarter of fiscal 2019, the cumulative net unrealized gains (losses) for these investments contained within Accumulated o ther comprehensive loss were reclassified through Accumulated deficit as of July 1, 2018.

(b)	Includes purchases of equity securities as well as the equity securities received as consideration for the sale of Unruly to Tremor in the third quarter of fiscal 2020.

Mandatorily redeemable noncontrolling interests

The Company has liabilities recorded in its Balance Sheets for its mandatorily redeemable noncontrolling interests. These liabilities represent management’s best estimate of the amounts expected to be paid in accordance with the contractual terms of the underlying acquisition agreements. The fair values of these liabilities are based on the contractual payout formulas included in the acquisition agreements taking into account the expected performance of the business. Any remeasurements or accretion related to the Company’s mandatorily redeemable noncontrolling interests are recorded through Interest expense, net in the Statements of Operations. As the fair value does not rely on observable market inputs, the Company classifies these liabilities as Level 3 in the fair value hierarchy.

A rollforward of the Company’s mandatorily redeemable noncontrolling interest liabilities classified as Level 3 is as follows:


	For the nine months ended March 31,
	2020			2019
	(in millions)
Balance - beginning of period	$	12		$	12
Payments (a)		(11	)		—
Accretion		—			1
Foreign exchange movements		—			(1	)
Other		(1	)		—

Balance - end of period	$	—		$	12

(a)	In July 2019, REA Group acquired the remaining 19.7% interest in Smartline Home Loans Pty Limited for approximately $11 million, increasing REA Group’s ownership to 100%.

Derivative Instruments

The Company is directly and indirectly affected by risks associated with changes in certain market conditions. When deemed appropriate, the Company uses derivative instruments to mitigate the potential impact of these market risks. The primary market risks managed by the Company through the use of derivative instruments include:

•

foreign currency exchange rate risk: arising primarily through Foxtel Debt Group borrowings denominated in United States (“U.S.”) dollars, payments for customer premise equipment, and certain programming rights; and

•

interest rate risk: arising from fixed and floating rate Foxtel Debt Group borrowings.

The Company formally designates qualifying derivatives as hedge relationships (“hedges”) and applies hedge accounting when considered appropriate. For economic hedges where no hedge relationship has been designated, changes in fair value are included as a component of net income in each reporting period within Other, net in the Statements of Operations. The Company does not use derivative financial instruments for trading or speculative purposes.

Hedges are classified as current or

non-current

in the Balance Sheets based on their maturity dates. Refer to the table below for further details:


			As of			As of
	Balance Sheet Location		March 31, 2020			June 30, 2019
			(in millions)
Foreign currency derivatives - cash flow hedges		Other current assets	$	4		$	1
Cross currency interest rate derivatives - fair value hedges		Other current assets		—			8
Cross currency interest rate derivatives - economic hedges		Other current assets		—			12
Cross currency interest rate derivatives - cash flow hedges		Other current assets		—			33
Cross currency interest rate derivatives - fair value hedges		Other non-current assets		30			21
Cross currency interest rate derivatives - cash flow hedges		Other non-current assets		120			83
Interest rate derivatives - cash flow hedges		Other current liabilities		—			(2	)
Interest rate derivatives - cash flow hedges		Other non-current liabilities		(15	)		(18	)
Cross currency interest rate derivatives - cash flow hedges		Other non-current liabilities		(17	)		(18	)

Cash flow hedges

The Company utilizes a combination of foreign currency derivatives, interest rate derivatives and cross currency interest rate derivatives to mitigate currency exchange and interest rate risk in relation to future interest and principal payments and payments for customer premise equipment.

The total notional value of foreign currency contract derivatives designated for hedging was $59 million as of March 31, 2020. The maximum hedged term over which the Company is hedging exposure to foreign currency fluctuations is to February 2021. As of March 31, 2020, the Company estimates that approximately $2 million of net derivative gains related to its foreign currency contract derivative cash flow hedges included in Accumulated other comprehensive loss will be reclassified into the Statement of Operations within the next 12 months.

The total notional value of interest rate swap derivatives designated as cash flow hedges was approximately A$300 million as of March 31, 2020. The maximum hedged term over which the Company is hedging exposure to variability in interest payments is to September 2022. As of March 31, 2020, the Company estimates that approximately $3 million of net derivative gains related to its interest rate swap derivative cash flow hedges included in Accumulated other comprehensive loss will be reclassified into the Statement of Operations within the next 12 months.

The total notional value of cross currency interest rate swaps that were designated as cash flow hedges was approximately $280 million as of March 31, 2020. The maximum hedged term over which the Company is hedging exposure to variability in interest payments is to July 2024. As of March 31, 2020, the Company estimates that approximately $2 million of net derivative gains related to its cross currency interest rate swap derivative cash flow hedges included in Accumulated other comprehensive loss will be reclassified into the Statement of Operations within the next 12 months.

The following tables present the impact that changes in the fair values of derivatives designated as cash flow hedges had on Accumulated other comprehensive loss and the Statement of Operations during the three and nine months ended March 31, 2020 and 2019.


	Gain (loss) recognized in Accumulated						(Gain) loss reclassified from Accumulated
	Other Comprehensive Loss for the three months ended						Other Comprehensive Loss for the three months ended					Income statement
	March 31,						March 31,					location
	2020			2019			2020			2019
	(in millions)
Derivative instruments designated as cash flow hedges:
Foreign currency derivatives - cash flow hedges	$	5		$	(2	)	$	(1	)	$	—	Operating expenses
Cross currency interest rate derivatives - cash flow hedges		43			(9	)		(33	)		7	Interest expense, net
Interest rate derivatives - cash flow hedges		(3	)		(4	)		1			2	Interest expense, net

Total	$	45		$	(15	)	$	(33	)	$	9


	Gain (loss) recognized in Accumulated						(Gain) loss reclassified from Accumulated
	Other Comprehensive Loss for the nine months ended						Other Comprehensive Loss for the nine months ended						Income statement
	March 31,						March 31,						location
	2020			2019			2020			2019
	(in millions)
Derivative instruments designated as cash flow hedges:
Foreign currency derivatives - cash flow hedges	$	3		$	2		$	(3	)	$	(2	)	Operating expenses
Cross currency interest rate derivatives - cash flow hedges		35			7			(30	)		(5	)	Interest expense, net
Interest rate derivatives - cash flow hedges		(6	)		(6	)		(4	)		6		Interest expense, net

Total	$	32		$	3		$	(37	)	$	(1	)

Upon adoption of ASU

2017-12,

the Company reclassified $5 million in gains from Accumulated deficit to Accumulated other comprehensive loss related to amounts previously recorded for the ineffective portion of outstanding derivative instruments designated as cash flow hedges. During the three months ended March 31, 2019, the Company excluded the currency basis from the changes in fair value of the derivative instruments from the assessment of hedge effectiveness.

Fair value hedges

Borrowings issued at fixed rates and in U.S. dollars expose the Company to fair value interest rate risk and currency exchange rate risk. The Company manages fair value interest rate risk and currency exchange rate risk through the use of cross currency interest rate swaps under which the Company exchanges fixed interest payments equivalent to the interest payments on the U.S. dollar denominated debt for floating rate Australian dollar denominated interest payments. The changes in fair value of derivatives designated as fair value hedges and the offsetting changes in fair value of the hedged items are recognized in Other, net. For the nine months ended March 31, 2020, such adjustments increased the carrying value of borrowings by $3 million.

The total notional value of the fair value hedges was approximately $70 million as of March 31, 2020. The maximum hedged term over which the Company is hedging exposure to variability in interest payments is to July 2024.

During the three and nine months ended March 31, 2020 and 2019, the amount recognized in the Statement of Operations on derivative instruments designated as fair value hedges related to the ineffective portion was nil and the Company excluded the currency basis from the changes in fair value of the derivative instruments from the assessment of hedge effectiveness.

The following sets forth the effect of fair value hedging relationships on hedged items in the Balance Sheets as of March 31, 2020:


	As of
	March 31, 2020
	(in millions)
Borrowings:
Carrying amount of hedged item	$	72
Cumulative hedging adjustments included in the carrying amount		5

Nonrecurring Fair Value Measurements

In addition to assets and liabilities that are remeasured at fair value on a recurring basis, the Company has certain assets, primarily goodwill, intangible assets, equity method investments and property, plant and equipment, that are not required to be remeasured to fair value at the end of each reporting period. On an ongoing basis, the Company monitors whether events occur or circumstances change that would more likely than not reduce the fair values of these assets below their carrying amounts. If the Company determines that these assets are impaired, the Company would write down these assets to fair value. These nonrecurring fair value measurements are considered to be Level 3 in the fair value hierarchy.

During the third quarter of fiscal 2020, the Company recognized

non-cash

impairment charges of $882million and $49million related to goodwill and indefinite-lived intangible assets, respectively, at its Foxtel reporting unit. The carrying value of goodwill at Foxtel decreased from $1,668 million

to $786 million and the carrying value of indefinite-lived intangible assets decreased from $189million to $140 million. See Note 4—Impairment and Restructuring Charges.

During the first quarter of fiscal 2020, the Company recognized

non-cash

impairment charges of $122 million and $113 million related to goodwill and indefinite-lived intangible assets, respectively, at the News America Marketing reporting unit. The carrying value of goodwill at News America Marketing decreased from $122 million to nil and the value of indefinite-lived intangible assets decreased from $308 million to $195 million. See Note

—Impairment and Restructuring Charges.

The Company did not recognize any write-downs on the carrying value of its assets during the three and nine months ended March 31, 2019.

Other Fair Value Measurements

As of March 31, 2020, the carrying value of the Company’s outstanding borrowings approximates the fair value. The U.S. private placement borrowings are classified as Level 2 and the remaining borrowings are classified as Level 3 in the fair value hierarchy.