In accordance with ASC 820, “Fair Value Measurements” (“ASC 820”) fair value measurements are required to be disclosed using a three-tiered fair value hierarchy which distinguishes market participant assumptions into the following categories:

•Level 2 — Observable inputs other than quoted prices included in Level 1. The Company could value assets and liabilities included in this level using dealer and broker quotations, certain pricing models, bid prices, quoted prices for similar assets and liabilities in active markets or other inputs that are observable or can be corroborated by observable market data.

•Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. For the Company, this primarily includes the use of forecasted financial information and other valuation related assumptions such as discount rates and long term growth rates in the income approach as well as the market approach which utilizes certain market and transaction multiples.


	As of March 31, 2021								As of June 30, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in millions)
Assets:

Cross-currency interest rate derivatives - fair value hedges	$	—	$	17	$	—	$	17	$	—	$	24	$	—	$	24

Cross-currency interest rate derivatives - cash flow hedges	—		—		—		—		—		98		—		98
Cross-currency interest rate derivatives (a)	—		71		—		71		—		—		—		—
Equity securities(b)	152		—		116		268		54		—		123		177
Total assets	$	152	$	88	$	116	$	356	$	54	$	122	$	123	$	299
Liabilities:
Foreign currency derivatives - cash flow hedges	$	—	$	1	$	—	$	1	$	—	$	3	$	—	$	3
Interest rate derivatives - cash flow hedges	—		12		—		12		—		16		—		16

Cross-currency interest rate derivatives - cash flow hedges	—		—		—		—		—		18		—		18
Cross-currency interest rate derivatives (a)	—		15		—		15		—		—		—		—
Total liabilities	$	—	$	28	$	—	$	28	$	—	$	37	$	—	$	37

(a)The Company determined that its cross-currency interest rate derivatives are no longer considered highly effective as of December 31, 2020 primarily due to changes in foreign exchange and interest rates.

During the three months ended December 31, 2020, the Company reclassified its investment in Tremor from Level 3 to Level 1 within the fair value hierarchy, as the sale restrictions are expected to lapse within 12 months.

The fair values of equity securities with quoted prices in active markets are determined based on the closing price at the end of each reporting period. These securities are classified as Level 1 in the fair value hierarchy outlined above. The fair values of equity securities without readily determinable fair market values are determined based on cost, less any impairment, plus or minus changes in fair value resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. These securities are classified as Level 3 in the fair value hierarchy outlined above.


	For the nine months ended March 31,
	2021		2020
	(in millions)
Balance - beginning of period	$	123	$	113
Additions(a)	10		17

Measurement adjustments	21		(3)
Foreign exchange and other(b)	(38)		(2)
Balance - end of period	$	116	$	125

(b)During the three months ended December 31, 2020, the Company reclassified its investment in Tremor from Level 3 to Level 1 within the fair value hierarchy, as the sale restrictions are expected to lapse within 12 months.

The Company is directly and indirectly affected by risks associated with changes in certain market conditions. When deemed appropriate, the Company uses derivative instruments to mitigate the potential impact of these market risks. The primary market risks managed by the Company through the use of derivative instruments include:

•foreign currency exchange rate risk: arising primarily through Foxtel Debt Group borrowings denominated in United States (“U.S.”) dollars, payments for customer premise equipment, and certain programming rights; and

The Company formally designates qualifying derivatives as hedge relationships (“hedges”) and applies hedge accounting when considered appropriate. The Company does not use derivative financial instruments for trading or speculative purposes. For economic hedges where no hedge relationship has been designated or hedge accounting has been discontinued, changes in fair value are included as a component of net income in each reporting period within Other, net in the Statements of Operations. When a derivative is determined not to be highly effective as a hedge or the underlying hedged transaction is no longer probable, the Company discontinues hedge accounting prospectively.

Upon adoption of ASU 2017-12 as of July 1, 2019, the Company reclassified $5 million in gains from Accumulated deficit to Accumulated other comprehensive loss related to amounts previously recorded for the ineffective portion of outstanding derivative instruments designated as cash flow hedges. During the three and nine months ended March 31, 2021 and 2020, the Company excluded the currency basis from the changes in fair value of the derivative instruments from the assessment of hedge effectiveness.


	Balance Sheet Location	As of March 31, 2021		As of June 30, 2020
		(in millions)




Cross-currency interest rate derivatives - fair value hedges	Other non-current assets	$	17	$	24
Cross-currency interest rate derivatives - cash flow hedges	Other non-current assets	—		98
Cross-currency interest rate derivatives (a)	Other non-current assets	71		—
Foreign currency derivatives - cash flow hedges	Other current liabilities	(1)		(3)

Interest rate derivatives - cash flow hedges	Other non-current liabilities	(12)		(16)
Cross-currency interest rate derivatives - cash flow hedges	Other non-current liabilities	—		(18)
Cross-currency interest rate derivatives (a)	Other non-current liabilities	(15)		—

The Company utilizes a combination of foreign currency derivatives and interest rate derivatives to mitigate currency exchange rate risk and interest rate risk in relation to future interest and principal payments and payments for customer premise equipment and certain programming rights.

The total notional value of foreign currency contract derivatives designated for hedging was $11 million as of March 31, 2021. The maximum hedged term over which the Company is hedging exposure to foreign currency fluctuations is one year. As of March 31, 2021, the Company estimates that approximately $1 million of net derivative losses related to its foreign currency contract derivative cash flow hedges included in Accumulated other comprehensive loss will be reclassified into the Statements of Operations within the next 12 months.

The total notional value of interest rate swap derivatives designated for hedging was approximately A$300 million as of March 31, 2021. The maximum hedged term over which the Company is hedging exposure to variability in interest payments is to September 2022. As of March 31, 2021, the Company estimates that approximately $5 million of net derivative losses

related to its interest rate swap derivative cash flow hedges included in Accumulated other comprehensive loss will be reclassified into the Statements of Operations within the next 12 months.

The Company utilizes cross-currency interest rate derivatives to mitigate currency exchange and interest rate risk in relation to future interest and principal payments. The Company determined that these cash flow hedges no longer qualified as highly effective as of December 31, 2020 primarily due to changes in foreign exchange and interest rates. Amounts recognized in Accumulated other comprehensive loss during the periods the hedges were considered highly effective will continue to be reclassified out of Accumulated other comprehensive loss over the remaining term of the derivatives. Changes in the fair values of these derivatives will be recognized within Other, net in the Statements of Operations on a prospective basis.

The total notional value of cross-currency interest rate swaps for which the Company discontinued hedge accounting was approximately $280 million as of March 31, 2021. The maximum hedged term over which the Company is hedging exposure to variability in interest and principal payments is to July 2024. As of March 31, 2021, the Company estimates that approximately $5 million of net derivative gains related to its cross-currency interest rate swap derivative cash flow hedges included in Accumulated other comprehensive loss will be reclassified into the Statements of Operations within the next 12 months.

The following tables present the impact that changes in the fair values had on Accumulated other comprehensive loss and the Statements of Operations during the three and nine months ended March 31, 2021 and 2020 for both derivatives designated as cash flow hedges that continue to be highly effective and derivatives initially designated as cash flow hedges but for which hedge accounting was discontinued as of December 31, 2020:


	Gain (loss) recognized in Accumulated Other Comprehensive Loss for the three months ended March 31,				(Gain) loss reclassified from Accumulated Other Comprehensive Loss for the three months ended March 31,				Income statement location
	2021		2020		2021		2020
	(in millions)
Foreign currency derivatives - cash flow hedges	$	3	$	5	$	—	$	(1)	Operating expenses
Cross-currency interest rate derivatives	—		43		(1)		(33)		Interest expense, net
Interest rate derivatives - cash flow hedges	—		(3)		1		1		Interest expense, net
Total	$	3	$	45	$	—	$	(33)


	Gain (loss) recognized in Accumulated Other Comprehensive Loss for the nine months ended March 31,				(Gain) loss reclassified from Accumulated Other Comprehensive Loss for the nine months ended March 31,				Income statement location
	2021		2020		2021		2020
	(in millions)
Foreign currency derivatives - cash flow hedges	$	3	$	3	$	(1)	$	(3)	Operating expenses
Cross-currency interest rate derivatives	(15)		35		12		(30)		Interest expense, net
Interest rate derivatives - cash flow hedges	(1)		(6)		4		(4)		Interest expense, net
Total	$	(13)	$	32	$	15	$	(37)

The gain resulting from the changes in fair value of cross-currency interest rate derivatives that were discontinued as cash flow hedges due to hedge ineffectiveness as of December 31, 2020 was approximately $5 million and $7 million for the three and nine months ended March 31, 2021, respectively, and was recognized in Other, net in the Statements of Operations.

Borrowings issued at fixed rates and in U.S. dollars expose the Company to fair value interest rate risk and currency exchange rate risk. The Company manages fair value interest rate risk and currency exchange rate risk through the use of cross-currency

interest rate swaps under which the Company exchanges fixed interest payments equivalent to the interest payments on the U.S. dollar denominated debt for floating rate Australian dollar denominated interest payments. The changes in fair value of derivatives designated as fair value hedges and the offsetting changes in fair value of the hedged items are recognized in Other, net. For the nine months ended March 31, 2021, such adjustments increased the carrying value of borrowings by nil.

The total notional value of the fair value hedges was approximately $70 million as of March 31, 2021. The maximum hedged term over which the Company is hedging exposure to variability in interest payments is to July 2024.

During the nine months ended March 31, 2021 and 2020, the amount recognized in the Statements of Operations on derivative instruments designated as fair value hedges related to the ineffective portion was $1 million and nil, respectively, and the Company excluded the currency basis from the changes in fair value of the derivative instruments from the assessment of hedge effectiveness.

As of March 31, 2021, the carrying value of the Company’s outstanding borrowings approximates the fair value. The U.S. private placement borrowings are classified as Level 2 and the remaining borrowings are classified as Level 3 in the fair value hierarchy.