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RISK MANAGEMENT ACTIVITIES AND FAIR VALUE MEASUREMENTS
 6 Months Ended
Dec. 31, 2023
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, 2023.
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. Except for the impairment of the Gillette indefinite-lived intangible asset discussed in Note 4, there were no significant assets or liabilities that were re-measured at fair value on a non-recurring basis during the six months ended December 31, 2023 and 2022.
Cash equivalents were $6.3 billion and $6.8 billion as of December 31, 2023 and June 30, 2023, respectively, and are classified as Level 1 within the fair value hierarchy. The Company had no other material investments in debt or equity securities during the periods presented.
The fair value of long-term debt was $25.6 billion and $26.9 billion as of December 31, 2023 and June 30, 2023, respectively. This includes the current portion of long-term debt instruments ($3.4 billion and $3.9 billion as of December 31, 2023 and June 30, 2023, respectively). Certain long-term debt (debt 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, 2023 and June 30, 2023, are as follows:
Notional AmountFair Value AssetFair Value (Liability)
December 31, 2023June 30, 2023December 31, 2023June 30, 2023December 31, 2023June 30, 2023
DERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPS
Interest rate contracts$3,098 $4,044 $— $— $(317)$(445)
DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS
Foreign currency interest rate contracts$12,267 $11,005 $5 $26 $(347)$(631)
TOTAL DERIVATIVES DESIGNATED AS HEDGING INSTRUMENTS$15,365 $15,049 $5 $26 $(664)$(1,076)
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
Foreign currency contracts$4,321 $3,489 $37 $7 $(7)$(42)
TOTAL DERIVATIVES AT FAIR VALUE$19,686 $18,538 $42 $33 $(671)$(1,118)
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 $2.8 billion and $3.6 billion as of December 31, 2023 and June 30, 2023, 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 $10.8 billion and $11.8 billion as of December 31, 2023 and June 30, 2023, respectively.
Derivative assets are presented in Prepaid expenses and other current assets or Other noncurrent assets. Derivative liabilities are presented in Accrued and other liabilities or Other noncurrent liabilities. Changes in the fair value of net investment hedges are recognized in the Foreign currency translation component of Other comprehensive income (OCI). All of the Company's derivative assets and liabilities measured at fair value are classified as Level 2 within the fair value hierarchy.
Certain of the Company's financial instruments used in hedging transactions are governed by industry standard netting and collateral agreements with counterparties. If the Company's credit rating were to fall below the levels stipulated in the agreements, the counterparties could demand either collateralization or termination of the arrangements. The aggregate fair value of the instruments covered by these contractual features that are in a net liability position was $653 and $1,088 as of December 31, 2023 and June 30, 2023, respectively. The Company has not been required to post collateral as a result of these contractual features.
Before tax gains on our financial instruments in hedging relationships are categorized as follows:
Amount of Loss Recognized in OCI on Derivatives
Three Months Ended December 31Six Months Ended December 31
2023202220232022
DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS (1) (2)
Foreign exchange contracts$(487)$(1,013)$(202)$(305)
(1)    For the derivatives in net investment hedging relationships, the amount of gain excluded from effectiveness testing, which was recognized in earnings, was $62 and $69 for the three months ended December 31, 2023 and 2022, respectively. The amount of gain excluded from effectiveness testing was $130 and $115 for the six months ended December 31, 2023 and 2022, 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 loss recognized in Accumulated other comprehensive income (AOCI) for such instruments was $(504) and $(862) for the three months ended December 31, 2023 and 2022, respectively. The amount of loss recognized in Accumulated other comprehensive income (AOCI) for such instruments was $(159) and $(164) for the six months ended December 31, 2023 and 2022, respectively.
Amount of Gain/(Loss) Recognized in Earnings
Three Months Ended December 31Six Months Ended December 31
2023202220232022
DERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPS
Interest rate contracts$117 $(49)$128 $(180)
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
Foreign currency contracts$128 $95 $57 $(51)
The gains/(losses) 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 Interest expense. The gains/(losses) 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 Selling, general and administrative expense (SG&A).