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Fair Value

3 Months Ended

Sep. 30, 2021

FAIR VALUE

In accordance with ASC 820, “Fair Value Measurement,” fair value measurements are required to be disclosed using a three-tiered fair value hierarchy which distinguishes market participant assumptions into the following categories: (i) inputs that are quoted prices in active markets (“Level 1”); (ii) inputs other than quoted prices included within Level 1 that are observable, including quoted prices for similar assets or liabilities (“Level 2”); and (iii) inputs that require the entity to use its own assumptions about market participant assumptions (“Level 3”).

The following tables present information about financial assets and liabilities carried at fair value on a recurring basis:


	Fair value measurements
	As of September 30, 2021
	Total		Level 1			Level 2		Level 3
	(in millions)
Assets
Investments in equity securities	$	857	$	857	(a)	$	—	$	—
Redeemable noncontrolling interests	(302)		—			—		(302)		(b)
Total	$	555	$	857		$	—	$	(302)


	Fair value measurements
	As of June 30, 2021
	Total		Level 1			Level 2		Level 3
	(in millions)
Assets
Investments in equity securities	$	788	$	788	(a)	$	—	$	—
Redeemable noncontrolling interests	(261)		—			—		(261)		(b)
Total	$	527	$	788		$	—	$	(261)


(a)			The investment categorized as Level 1 represents an investment in equity securities of Flutter Entertainment plc (“Flutter”) with a readily determinable fair value (See Note 3—Acquisitions, Disposals and Other Transactions in the 2021 Form 10-K under the heading “Flutter” for additional information).


(b)			The Company utilizes the market approach valuation technique for its Level 3 fair value measures. Inputs to such measures could include observable market data obtained from independent sources such as broker quotes and recent market transactions for similar assets. It is the Company’s policy to maximize the use of observable inputs in the measurement of its Level 3 fair value measurements. To the extent observable inputs are not available, the Company utilizes unobservable inputs based upon the assumptions market participants would use in valuing the liability. Examples of utilized unobservable inputs are future cash flows and long-term growth rates.

Redeemable Noncontrolling Interests

The Company accounts for redeemable noncontrolling interests in accordance with ASC 480-10-S99-3A, “Distinguishing Liabilities from Equity,” because their exercise is outside the control of the Company. The redeemable noncontrolling interests recorded are put rights held by minority shareholders in a majority-owned sports network, Credible Labs Inc. ("Credible") and an entertainment production company.

The changes in redeemable noncontrolling interests classified as Level 3 measurements were as follows:


	For the three months ended September 30,
	2021		2020
	(in millions)
Beginning of period	$	(261)	$	(305)
Acquisitions(a)	(45)		—
Net loss (income)	1		(4)
Distributions	3		6
Accretion and other	—		(7)
End of period	$	(302)	$	(310)


(a)			The increase for the three months ended September 30, 2021, was due to the acquisition of an entertainment production company.

As of September 30, 2021, the final portion of the sports network minority shareholder's put right was exercisable. In October 2021, this portion of the minority shareholder's put right expired and, as a result, approximately $110 million will be reclassified into equity in the Financial Statements for the three months ending December 31, 2021. The put right held by the Credible minority shareholder will become exercisable in fiscal 2025. The put right held by the entertainment production company's minority shareholder will become exercisable in fiscal 2027.

Financial Instruments

The carrying value of the Company’s financial instruments, such as cash and cash equivalents, receivables, payables and investments, accounted for using the measurement alternative method in accordance with ASC 321, approximates fair value.


	As of September 30, 2021		As of June 30, 2021
	(in millions)
Borrowings
Fair value	$	9,460	$	9,474
Carrying value	$	7,953	$	7,951

Fair value is generally determined by reference to market values resulting from trading on a national securities exchange or in an over-the-counter market (a Level 1 measurement).

Concentrations of Credit Risk

Cash and cash equivalents are maintained with several financial institutions. The Company has deposits held with banks that exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions of reputable credit and, therefore, bear minimal credit risk.

Generally, the Company does not require collateral to secure receivables. As of September 30, 2021 and June 30, 2021, the Company had no customers that accounted for 10% or more of the Company’s receivables.

- 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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