XML 31 R16.htm IDEA: XBRL DOCUMENT v3.10.0.1
RISK MANAGEMENT ACTIVITIES AND FAIR VALUE MEASUREMENTS
 6 Months Ended
Dec. 31, 2018
Risk Management Activities and Fair Value Measurements [Abstract]  
Risk Management And Fair Value [Text Block] Risk Management Activities and Fair Value Measurements
As a multinational company with diverse product offerings, we are exposed to market risks, such as changes in interest rates, currency exchange rates and commodity prices. There have been no significant changes in our risk management policies or activities during the six months ended December 31, 2018.
The Company has not changed its valuation techniques used in measuring the fair value of any financial assets and liabilities during the period. The Company recognizes transfers between levels within the fair value hierarchy, if any, at the end of each quarter. There were no transfers between levels during the periods presented. Also, there was no significant activity within the Level 3 assets and liabilities during the periods presented. There were no significant assets or liabilities that were remeasured at fair value on a non-recurring basis for the six months ended December 31, 2018.
The following table sets forth the Company’s financial assets as of December 31, 2018 and June 30, 2018 that are measured at fair value on a recurring basis during the period:
 
Fair Value Asset
 
December 31, 2018
 
June 30, 2018
Investments:
 
 
 
U.S. government securities
$
5,177

 
$
5,544

Corporate bond securities
3,244

 
3,737

Other investments
163

 
141

Total
$
8,584

 
$
9,422


Investment securities are presented in Available-for-sale investment securities and Other noncurrent assets. The amortized cost of U.S. government securities with maturities less than one year was $1,601 as of December 31, 2018 and $2,003 as of June 30, 2018. The amortized cost of U.S. government securities with maturities between one and five years was $3,657 as of December 31, 2018 and $3,659 as of June 30, 2018. The amortized cost of Corporate bond securities with maturities of less than a year was $1,525 as of December 31, 2018 and $1,291 as of June 30, 2018. The amortized cost of Corporate bond securities with maturities between one and five years was $1,760 as of December 31, 2018 and $2,503 as of June 30, 2018. The Company's investments measured at fair value are generally classified as Level 2 within the fair value hierarchy. There are no material investment balances classified as Level 1 or Level 3 within the fair value hierarchy, or that used net asset value as a practical expedient. Fair values are generally estimated based upon quoted market prices for similar instruments.
The fair value of long-term debt was $24,602 and $23,402 as of December 31, 2018 and June 30, 2018, respectively. This includes the current portion of debt instruments ($2,301 and $1,769 as of December 31, 2018 and June 30, 2018, respectively). Certain long-term debt (debt tied to derivatives designated as a fair value hedge) is recorded at fair value. All other long-term debt is recorded at amortized cost, but is measured at fair value for disclosure purposes. We consider our debt to be Level 2 in the fair value hierarchy. Fair values are generally estimated based on quoted market prices for identical or similar instruments.
Disclosures about Financial Instruments
The notional amounts and fair values of financial instruments used in hedging transactions as of December 31, 2018 and June 30, 2018 are as follows:
 
Notional Amount
 
Fair Value Asset
 
Fair Value (Liability)
 
December 31, 2018
 
June 30, 2018
 
December 31, 2018
 
June 30, 2018
 
December 31, 2018
 
June 30, 2018
DERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPS
Interest rate contracts
$
4,550

 
$
4,587

 
$
118

 
$
125

 
$
(28
)
 
$
(53
)
DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS
Foreign currency interest rate contracts
$
1,855

 
$
1,848

 
$
21

 
$
41

 
$
(59
)
 
$
(75
)
TOTAL DERIVATIVES DESIGNATED AS HEDGING INSTRUMENTS
$
6,405

 
$
6,435

 
$
139

 
$
166

 
$
(87
)
 
$
(128
)
 
 
 
 
 
 
 
 
 
 
 
 
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
Foreign currency contracts
$
7,025

 
$
7,358

 
$
49

 
$
30

 
$
(29
)
 
$
(56
)
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL DERIVATIVES AT FAIR VALUE
$
13,430

 
$
13,793

 
$
188

 
$
196

 
$
(116
)
 
$
(184
)

All derivative assets are presented in Prepaid expenses and other current assets or Other noncurrent assets. All derivative liabilities are presented in Accrued and other liabilities or Other noncurrent liabilities.
The fair value of the interest rate derivative asset/liability directly offsets the cumulative amount of the fair value hedging adjustment included in the carrying amount of the underlying debt obligation. The carrying amount of the underlying debt obligation, which includes the unamortized discount or premium and the fair value adjustment, was $4,623 and $4,639 as of December 31, 2018 and June 30, 2018, respectively. In addition to the foreign currency derivative contracts designated as net investment hedges, certain of our foreign currency denominated debt instruments are designated as net investment hedges. The carrying value of those debt instruments designated as net investment hedges, which includes the adjustment for the foreign currency transaction gain or loss on those instruments, was $17,092 and $15,012 as of December 31, 2018 and June 30, 2018, respectively. All of the Company's derivative assets and liabilities measured at fair value are classified as Level 2 within the fair value hierarchy.
Before tax gains/(losses) on our financial instruments in hedging relationships are categorized as follows:
 
Amount of Gain/(Loss) Recognized in OCI on Derivatives
 
Three Months Ended December 31
 
Six Months Ended December 31
 
2018
 
2017
 
2018
 
2017
DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS (1) (2)
Foreign exchange contracts
$
23

 
$
(89
)
 
$
19

 
$
(262
)

(1) 
For the derivatives in net investment hedging relationships, the amount of gain/(loss) excluded from effectiveness testing, which was recognized in earnings, was $13 and $42 for the three months ended December 31, 2018 and 2017, respectively. The amount of gain/(loss) excluded from effectiveness testing was $27 and $73 for the six months ended December 31, 2018 and 2017, respectively.
(2) 
In addition to the foreign currency derivative contracts designated as net investment hedges, certain of our foreign currency denominated debt instruments are designated as net investment hedges. The amount of gain/(loss) recognized in AOCI for such instruments was $228 and $(176), for the three months ended December 31, 2018 and 2017, respectively. The amount of gain/(loss) recognized in AOCI for such instruments was $241 and $(745), for the six months ended December 31, 2018 and 2017, respectively.
 
Amount of Gain/(Loss) Recognized in Earnings
 
Three Months Ended December 31
 
Six Months Ended December 31
 
2018
 
2017
 
2018
 
2017
DERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPS
 
 
 
 
Interest rate contracts
$
42

 
$
(38
)
 
$
18

 
$
(41
)
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
 
 
 
 
Foreign currency contracts
$
(5
)
 
$
(1
)
 
$
(7
)
 
$
(2
)

The gain/(loss) on the derivatives in fair value hedging relationships is fully offset by the mark-to-market impact of the related exposure. These are both recognized in the Consolidated Statements of Earnings in Interest Expense. The gain/(loss) on derivatives not designated as hedging instruments is substantially offset by the currency mark-to-market of the related exposure. These are both recognized in the Consolidated Statements of Earnings in SG&A.