Fair value measurements

12 Months Ended

Aug. 31, 2023

Fair Value Disclosures [Abstract]

Fair value measurements

Fair value measurementsThe 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):

	August 31, 2023		Level 1		Level 2		Level 3
Assets:
Money market funds 1	$	11	$	11	$	—	$	—
Cross currency interest rate swaps 2	28		—		28		—
Foreign currency forwards 3	6		—		6		—
Investments in equity securities 4	17		17		—		—
Investment in debt securities 5	15		—		15		—
Total return swaps	1		—		1		—
Liabilities:
Variable prepaid forward 6	$	2,548	$	—	$	—	$	2,548
Foreign currency forwards 3	5		—		5		—
Total return swaps	1		—		1		—
Cross currency interest rate swaps 2	2		—		2		—

	August 31, 2022		Level 1		Level 2		Level 3
Assets:
Money market funds 1	$	1,114	$	1,114	$	—	$	—
Investments in debt securities 5	130		—		130		—
Foreign currency forwards 3	69		—		69		—
Investments in equity securities 4	1		1		—		—
Cross currency interest rate swaps 2	96		—		96		—
Liabilities:
Total return swaps	$	6	$	—	$	6	$	—
Foreign currency forwards 3	7		—		7		—

1.Money market funds are valued at the closing price reported by the fund sponsor and classified as marketable securities on the Consolidated Balance Sheets.

2.The fair value of 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 further information.

3.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 further information.

4.Fair values of quoted investments are based on current bid prices as of August 31, 2023 and August 31, 2022.

5.Includes investments in Treasury debt securities.

6.The fair value of the derivative was derived from a Black-Scholes valuation. The inputs used in valuing the derivative included observable inputs such as the floor and cap prices of the VPF, dividend yield of Cencora shares, risk free interest rate, and contractual term of the instrument, as well as unobservable inputs such as implied volatility of Cencora shares (ranging from 23.2% - 24.7% for the lower strike and 18.1% - 19.1% for the upper strike). See Note 9. Financial instruments, for further information.

There were no transfers between Levels in fiscal 2023 or 2022.

The roll forward of the fair value of the VPF derivatives associated with the forward sale of shares of Cencora common stock, classified as Level 3, for fiscal 2023 is as follows (in millions):

	2023
Opening balance	$	—
VPF derivative additions	(2,568)
Unrealized gains recorded in Other income, net	19
Ending balance	$	(2,548)

The carrying value of the Company's credit facilities approximated their respective fair values due to their short-term nature.

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 Financial Statements. As of August 31, 2023, the carrying amounts and estimated fair values of long term notes outstanding including the current portion were $7.7 billion and $6.8 billion, respectively.

The fair values of the notes outstanding are Level 1 fair value measures and determined based on quoted market price and translated at the August 31, 2023 rate, as applicable. The fair values and carrying values of these issuances do not include notes that have been redeemed or repaid as of August 31, 2023. See Note. 8 Debt, for further information. The carrying values of accounts receivable and trade accounts payable approximate their respective fair values due to their short-term nature.