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.

The Company has not changed its valuation techniques 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. Except for the impairment charges related to our Batteries business (see Note 4), there were no assets or liabilities that were remeasured at fair value on a non-recurring basis for the period ended December 31, 2014.

The following table sets forth the Company’s financial assets as of December 31, 2014 and June 30, 2014 that are measured at fair value on a recurring basis during the period:



	Fair Value Asset
	December 31, 2014		June 30, 2014
Investments
U.S. government securities	$	3,077	$	1,631
Corporate bond securities	970		497
Other investments	29		30
Total	$	4,076	$	2,158

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 $300 as of December 31, 2014 and $0 as of June 30, 2014. The amortized cost of U.S. government securities with maturities between one and five years was $2,793 as of December 31, 2014 and $1,649 as of June 30, 2014. The amortized cost of Corporate bond securities with maturities of less than a year was $91 as of December 31, 2014 and $39 as of June 30, 2014. The amortized cost of Corporate bond securities with maturities between one and five years was $883 as of December 31, 2014 and $458 as of June 30, 2014. 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 either Level 1 or Level 3 within the fair value hierarchy. Fair values are generally estimated based upon quoted market prices for similar instruments.

The fair value of long-term debt was $25,117 and $26,429 at December 31, 2014 and June 30, 2014, respectively. This includes the current portion ($4,312 and $4,400 as of December 31, 2014 and June 30, 2014, respectively) of debt instruments. Long-term debt is not recorded at fair value on a recurring basis but is measured at fair value for disclosure purposes. Long-term debt with fair value of $2,240 and $1,682 at December 31, 2014 and June 30, 2014, respectively, is classified as Level 2 within the fair value hierarchy. All remaining long-term debt is classified as Level 1 within the fair value hierarchy. Fair values are generally estimated based on quoted market prices for identical or similar instruments.

The following table sets forth the notional amounts and fair values of qualifying and non-qualifying financial instruments used in hedging transactions as of December 31, 2014 and June 30, 2014:



	Notional Amount				Fair Value Asset/(Liability)
	December 31, 2014		June 30, 2014		December 31, 2014			June 30, 2014
Derivatives in Cash Flow Hedging Relationships
Foreign currency contracts	$	951	$	951	$	300		$	187
Derivatives in Fair Value Hedging Relationships
Interest rate contracts	$	8,128	$	9,738	$	251		$	168
Derivatives in Net Investment Hedging Relationships
Net investment hedges	$	855	$	831	$	164		$	48
Derivatives Not Designated as Hedging Instruments
Foreign currency contracts	$	8,714	$	12,111	$	(143	)	$	(42	)

All derivative assets are presented in Prepaid expenses and other current assets and Other noncurrent assets. All derivative liabilities are presented in Accrued and other liabilities and Other noncurrent liabilities. The total notional amount of contracts outstanding at the end of the period is indicative of the Company's derivative activity during the period. The change in the notional balance of foreign currency contracts not designated as hedging instruments during the period reflects changes in the level of intercompany financing activity. All of the Company's derivative assets and liabilities measured at fair value are classified as Level 2 within the fair value hierarchy.



	Amount of Gain (Loss) Recognized in Accumulated OCI on Derivatives (Effective Portion)
	December 31, 2014		June 30, 2014
Derivatives in Cash Flow Hedging Relationships
Interest rate contracts	$	1	$	3
Foreign currency contracts	8		14
Total	$	9	$	17
Derivatives in Net Investment Hedging Relationships
Net investment hedges	$	103	$	30

The effective portion of gains and losses on derivative instruments that was recognized in other comprehensive income (OCI) during the six months ended December 31, 2014 and 2013 was not material. During the next 12 months, the amount of the December 31, 2014 accumulated OCI (AOCI) balance that will be reclassified to earnings is expected to be immaterial.

The amounts of gains and losses on qualifying and non-qualifying financial instruments used in hedging transactions for the three and six months ended December 31, 2014 and 2013 are as follows:



	Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income
	Three Months Ended December 31						Six Months Ended December 31
	2014			2013			2014			2013
Derivatives in Cash Flow Hedging Relationships ⁽¹⁾
Interest rate contracts	$	1		$	1		$	3		$	3
Foreign currency contracts	66			58			128			56
Total	$	67		$	59		$	131		$	59

	Amount of Gain/(Loss) Recognized in Income
	Three Months Ended December 31						Six Months Ended December 31
	2014			2013			2014			2013
Derivatives in Fair Value Hedging Relationships ⁽²⁾
Interest rate contracts	$	60		$	(84	)	83			(113		)
Debt	(60		)	84			(83		)	113
Total	$	—		$	—		$	—		$	—
Derivatives in Net Investment Hedging Relationships⁽²⁾
Net investment hedges	$	—		$	—		$	(1	)	$	—
Derivatives Not Designated as Hedging Instruments⁽³⁾
Foreign currency contracts	$	(316	)	$	(26	)	$	(729	)	$	83

⁽¹⁾

The gain or loss on the effective portion of cash flow hedging relationships is reclassified from AOCI into net income in the same period during which the related item affects earnings. Such amounts are included in the Consolidated Statements of Earnings as follows: interest rate contracts in Interest expense and foreign currency contracts in Selling, general and administrative expense (SG&A) and Interest expense.


⁽²⁾	The gain or loss on the ineffective portion of interest rate contracts and net investment hedges, if any, is included in the Consolidated Statements of Earnings in Interest expense.


⁽³⁾	The gain or loss on foreign currency contracts not designated as hedging instruments is included in the Consolidated Statements of Earnings in SG&A. This gain or loss substantially offsets the foreign currency mark-to-market impact of the related exposure.