Fair Value Measurements

9 Months Ended

Dec. 31, 2022

Note 12 – Fair Value Measurements

Recurring Fair Value Measurements

Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following tables summarize our financial assets and financial liabilities measured at fair value on a recurring basis by level within the fair value hierarchy except for certain investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient and are excluded from the leveling information provided in the tables below. Fair value amounts presented below are intended to permit reconciliation of the fair value hierarchy to the amounts presented in our Consolidated Balance Sheets.


	December 31, 2022
								Counterparty
								netting &			Fair
	Level 1		Level 2			Level 3		collateral			value
Investments in marketable securities:
Available-for-sale debt securities:
U.S. government and agency obligations	$	633	$	4		$	-	$	-		$	637
Foreign government and agency obligations		-		11			-		-			11
Municipal debt securities		-		8			-		-			8
Corporate debt securities		-		389			-		-			389
Mortgage-backed securities:
U.S. government agency		-		50			-		-			50
Non-agency residential		-		5			3		-			8
Non-agency commercial		-		55			22		-			77
Asset-backed securities		-		53			10		-			63
Available-for-sale debt securities total		633		575			35		-			1,243
Equity investments:
Fixed income mutual funds:
Fixed income mutual funds measured at net asset value												1,021
Total return bond funds		1,441		-			-		-			1,441
Equity mutual funds		813		-			-		-			813
Equity investments total		2,254		-			-		-			3,275
Investments in marketable securities total		2,887		575			35		-			4,518
Derivative assets:
Interest rate swaps		-		2,093			-		-			2,093
Foreign currency swaps		-		13			-		-			13
Counterparty netting and collateral		-		-			-		(2,052	)		(2,052	)
Derivative assets total		-		2,106			-		(2,052	)		54
Assets at fair value		2,887		2,681			35		(2,052	)		4,572
Derivative liabilities:
Interest rate swaps		-		(779	)		-		-			(779	)
Foreign currency swaps		-		(1,317	)		-		-			(1,317	)
Counterparty netting and collateral		-		-			-		2,095			2,095
Liabilities at fair value		-		(2,096	)		-		2,095			(1	)
Net assets at fair value	$	2,887	$	585		$	35	$	43		$	4,571

Note 12 – Fair Value Measurements (Continued)


	March 31, 2022
								Counterparty
								netting &			Fair
	Level 1		Level 2			Level 3		collateral			value
Investments in marketable securities:
Available-for-sale debt securities:
U.S. government and agency obligations	$	504	$	5		$	-	$	-		$	509
Foreign government and agency obligations		-		23			-		-			23
Municipal debt securities		-		10			-		-			10
Corporate debt securities		-		568			-		-			568
Mortgage-backed securities:
U.S. government agency		-		20			-		-			20
Non-agency residential		-		7			3		-			10
Non-agency commercial		-		78			8		-			86
Asset-backed securities		-		75			3		-			78
Available-for-sale debt securities total		504		786			14		-			1,304
Equity investments:
Fixed income mutual funds:
Fixed income mutual funds measured at net asset value												1,137
Total return bond funds		1,576		-			-		-			1,576
Equity mutual funds		936		-			-		-			936
Equity investments total		2,512		-			-		-			3,649
Investments in marketable securities total		3,016		786			14		-			4,953
Derivative assets:
Interest rate swaps		-		1,425			-		-			1,425
Foreign currency swaps		-		55			-		-			55
Counterparty netting and collateral		-		-			-		(1,419	)		(1,419	)
Derivative assets total		-		1,480			-		(1,419	)		61
Assets at fair value		3,016		2,266			14		(1,419	)		5,014
Derivative liabilities:
Interest rate swaps		-		(822	)		-		-			(822	)
Foreign currency swaps		-		(717	)		-		-			(717	)
Counterparty netting and collateral		-		-			-		1,514			1,514
Liabilities at fair value		-		(1,539	)		-		1,514			(25	)
Net assets at fair value	$	3,016	$	727		$	14	$	95		$	4,989

Level 3 Fair Value Measurements

The Level 3 financial assets and liabilities recorded at fair value which are subject to recurring and nonrecurring fair value measurement, and the corresponding activity and change in the fair value measurements of these assets and liabilities, were not significant to our Consolidated Balance Sheets as of December 31, 2022 and March 31, 2022, or Consolidated Statements of Income for the three and nine months ended December 31, 2022 and 2021.

Nonrecurring Fair Value Measurements

Nonrecurring fair value measurements include Level 3 net finance receivables that are not measured at fair value on a recurring basis but are subject to fair value adjustments utilizing the fair value of the underlying collateral when there is evidence of impairment. We did not have any significant nonrecurring fair value items as of December 31, 2022 and March 31, 2022.

Note 12 – Fair Value Measurements (Continued)

Financial Instruments

The following tables provide information about assets and liabilities not carried at fair value on a recurring basis on our Consolidated Balance Sheets:


	December 31, 2022
	Carrying								Total Fair
	value		Level 1		Level 2		Level 3		value
Financial assets
Finance receivables
Retail loan	$	77,786	$	-	$	-	$	76,370	$	76,370
Wholesale		3,900		-		-		3,881		3,881
Real estate		4,889		-		-		4,827		4,827
Working capital		2,940		-		-		2,854		2,854

Financial liabilities
Unsecured notes and loans payable	$	78,589	$	-	$	75,405	$	-	$	75,405
Secured notes and loans payable		31,510		-		-		30,766		30,766


	March 31, 2022
	Carrying								Total Fair
	value		Level 1		Level 2		Level 3		value
Financial assets
Finance receivables
Retail loan	$	72,369	$	-	$	-	$	73,385	$	73,385
Wholesale		2,940		-		-		2,931		2,931
Real estate		4,985		-		-		4,961		4,961
Working capital		2,256		-		-		2,171		2,171

Financial liabilities
Unsecured notes and loans payable	$	82,288	$	-	$	80,980	$	-	$	80,980
Secured notes and loans payable	$	26,864	$	-	$	-	$	26,500	$	26,500

Accrued interest related to finance receivables is in Other assets in the Consolidated Balance Sheets; however, TMCC measures the fair value of each class of finance receivables using scheduled principal and interest payments. Therefore, accrued interest has been included in the carrying value of each class of finance receivables in the previous tables, along with the finance receivables, deferred origination costs, deferred income, and allowance for credit losses. Finance receivables in the previous tables excludes related party transactions, for which the fair value approximates the carrying value, of $57 million and $90 million at December 31, 2022 and March 31, 2022, respectively. Fair values of related party finance receivables, net are classified as Level 3 within the fair value hierarchy.

For Cash and cash equivalents and Restricted cash and cash equivalents on our Consolidated Balance Sheets, the fair value approximates the carrying value and these instruments are classified as Level 1 within the fair value hierarchy.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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