Fair value measurements

9 Months Ended

May 31, 2022

Fair Value Disclosures [Abstract]

Fair value measurements

Note 10. Fair value measurements

The Company measures certain assets and liabilities in accordance with Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, which defines fair value as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. In addition, it establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels:

Level 1 - Quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2 - Observable inputs other than quoted prices in active markets.

Level 3 - Unobservable inputs for which there is little or no market data available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

Assets and liabilities measured at fair value on a recurring basis were as follows (in millions):

	May 31, 2022		Level 1		Level 2		Level 3
Assets:
Money market funds 1	$	2,173	$	2,173	$	—	$	—
Foreign currency forwards 2	210		—		210		—
Cross currency interest rate swaps 3	44		—		44		—
Total return swaps	7		—		7		—
Investments in equity securities 4	2		2		—		—
Liabilities:
Foreign currency forwards 2	$	20	$	—	$	20	$	—

	August 31, 2021		Level 1		Level 2		Level 3
Assets:
Money market funds 1	$	634	$	634	$	—	$	—
Investments in debt securities 5	663		—		—		663
Foreign currency forwards 2	46		—		46		—
Cross currency interest rate swaps 3	1		—		1		—
Total return swaps	2		—		2		—
Investments in equity securities 4	2		2		—		—
Liabilities:
Cross currency interest rate swaps 3	$	32	$	—	$	32	$	—
Foreign currency forwards 2	5		—		5		—

1.Money market funds are valued at the closing price reported by the fund sponsor.

2.The fair value of forward currency contracts is estimated by discounting the difference between the contractual forward price and the current available forward price for the residual maturity of the contract using observable market rates. See Note 9. Financial instruments, for additional information.

3.The fair value of interest rate swaps and cross currency interest rate swaps is calculated by discounting the estimated future cash flows based on the applicable observable yield curves. See Note 9. Financial instruments, for additional information.

4.Fair values of quoted investments are based on current bid prices as of May 31, 2022 and August 31, 2021.

5.Level 3 debt securities include investments in convertible debt securities of VillageMD which are valued on a quarterly basis using the Probability Weighted Expect Return Method with gains or losses recorded in Other comprehensive income within the Consolidated Condensed Balance Sheets. Inputs include the enterprise value, expected holding term of the investment, volatility and risk-free interest rates.

There were no transfers between Levels for the three and nine months ended May 31, 2022.

The Company reports its debt instruments under the guidance of ASC Topic 825, Financial Instruments, which requires disclosure of the fair value of the Company’s debt in the footnotes to the Consolidated Condensed Financial Statements. As of May 31, 2022, the carrying amounts and estimated fair values of long-term notes outstanding including the current portion were $8.4 billion and $8.1 billion, respectively.

The fair values of the notes outstanding are Level 1 fair value measures and determined based on quoted market prices and translated at the May 31, 2022 rate, as applicable. The fair values and carrying values of these issuances do not include notes that have been redeemed or repaid as of May 31, 2022. See Note 8. Debt, for further information. The carrying values of accounts receivable and trade accounts payable approximated their respective fair values due to their short-term nature.