Fair Value Measurements

6 Months Ended

Mar. 31, 2015

Fair Value Disclosures [Abstract]

Fair Value Measurements

10. Fair Value Measurements

ASC 820 defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity.

In addition to defining fair value, ASC 820 expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

— Level 1—inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

— Level 2—inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

— Level 3—inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models and similar techniques.

In accordance with the fair value hierarchy, described above, the following table shows the fair value of the Company’s financial instruments that are required to be measured at fair value as of March 31, 2015 and September 30, 2014.

	Fair Value Measurements as of  March 31, 2015
	(Level 1)		(Level 2)		(Level 3)			Total
	(in millions)
Other Current Liabilities:
Contractual Obligations (a)		—		—		(1	)		(1	)
Other Non-Current Liabilities:
Contractual Obligations (a)		—		—		—			—
Total	$	—	$	—	$	(1	)	$	(1	)

	Fair Value Measurements as of  September 30, 2014
	(Level 1)		(Level 2)		(Level 3)			Total
	(in millions)
Other Current Liabilities:
Contractual Obligations (a)		—		—		(2	)		(2	)
Other Non-Current Liabilities:
Contractual Obligations (a)		—		—		(1	)		(1	)
Total	$	—	$	—	$	(3	)	$	(3	)

(a) This represents purchase obligations and contingent consideration related to the Company’s various acquisitions. This is based on a discounted cash flow approach and it is adjusted to fair value on a recurring basis and any adjustments are included as a component of operating income in the statement of operations. These amounts were mainly calculated using unobservable inputs such as future earnings performance of the Company’s various acquisitions and the expected timing of the payment.

The following table reconciles the beginning and ending balances of net assets and liabilities classified as Level 3:

	Total
	(in millions)
Balance at September 30, 2014	$	(3	)
Additions		—
Reductions		—
Payments		2
Balance at March 31, 2015	$	(1	)

The majority of the Company’s non-financial instruments, which include goodwill, intangible assets, inventories, and property, plant, and equipment, are not required to be re-measured to fair value on a recurring basis. These assets are evaluated for impairment if certain triggering events occur. If such evaluation indicates that impairment exists, the asset is written down to its fair value. In addition, an impairment analysis is performed at least annually for goodwill and indefinite-lived intangible assets.

Fair Value of Debt

Based on the level of interest rates prevailing at March 31, 2015, the fair value of the Company’s debt was $2.958 billion. Based on the level of interest rates prevailing at September 30, 2014, the fair value of the Company’s debt was $3.026 billion. The fair value of the Company’s debt instruments are determined using quoted market prices from less active markets or by using quoted market prices for instruments with identical terms and maturities; both approaches are considered a Level 2 measurement.