Fair Value Measurements (Tables)

9 Months Ended

Mar. 31, 2017

Fair Value, Assets and Liabilities Measured on Recurring Basis

The following tables present the fair values for assets and (liabilities) measured on a recurring basis at:



	March 31, 2017
(in millions)	Level 1		Level 2		Level 3			Total
Assets:
Cash equivalents	$	6	$	—	$	—		$	6
Forward contracts (1)	—		13		—			13
Available-for-sale securities (2)	—		197		—			197
Other investments (3)	111		3		—			114
Liabilities:
Contingent Consideration (4)	—		—		(38		)	(38		)



	June 30, 2016
(in millions)	Level 1		Level 2		Level 3			Total
Assets:
Cash equivalents	$	516	$	—	$	—		$	516
Forward contracts (1)	—		19		—			19
Available-for-sale securities (2)	—		200		—			200
Other investments (3)	103		—		—			103
Liabilities:
Contingent Consideration (4)	—		—		(19		)	(19		)

(1)

The fair value of interest rate swaps, foreign currency contracts and commodity contracts is determined based on the present value of expected future cash flows considering the risks involved, including non-performance risk and using discount rates appropriate for the respective maturities. Observable Level 2 inputs are used to determine the present value of expected future cash flows. The fair value of these derivative contracts, which are subject to master netting arrangements under certain circumstances, is presented on a gross basis in the condensed consolidated balance sheets.


(2)	We invest in marketable securities, which are classified as available-for-sale and are carried at fair value in the condensed consolidated balance sheets. Observable Level 2 inputs such as quoted prices for similar securities, interest rate spreads, yield curves and credit risk are used to determine the fair value. See Note 5 for additional information regarding available-for-sale securities.

(3)

Level 1 other investments balance includes investments in mutual funds, which are used to offset fluctuations in deferred compensation liabilities. These mutual funds primarily invest in the equity securities of companies with large market capitalization and high quality fixed income debt securities. The fair value of these investments is determined using quoted market prices. Level 2 other investments are comprised of warrants for stock valued by utilizing observable inputs in a Black-Scholes model.

(4)

Contingent consideration represents the obligations incurred in connection with acquisitions. We do not deem the fair value of the contingent consideration obligations under any single acquisition to be significant. The estimate of fair value of the contingent consideration obligations requires subjective assumptions to be made regarding future business results, discount rates, discount periods and probabilities assigned to various potential business result scenarios and was determined using probability assessments with respect to the likelihood of reaching various targets or of achieving certain milestones. The fair value measurement is based on significant inputs unobservable in the market and thus represents a Level 3 measurement. Changes in current expectations of progress could change the probability of achieving the targets within the measurement periods and result in an increase or decrease in the fair value of the contingent consideration obligation.

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation

The following table presents those liabilities measured at fair value on a recurring basis using unobservable inputs (Level 3):



(in millions)	Contingent Consideration Obligation
Balance at June 30, 2016	$	19
Additions from acquisitions	22
Changes in fair value of contingent consideration (1)	—
Payment of contingent consideration	(3		)
Balance at March 31, 2017	$	38


(1)	Amount is included in amortization and other acquisition-related costs in the condensed consolidated statements of earnings.