Note 2 – 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.

	June 30, 2017
								Counterparty
								netting &			Fair
	Level 1		Level 2			Level 3		collateral			value
Cash equivalents:
Money market instruments	$	263	$	1,163		$	-	$	-		$	1,426
Certificates of deposit		-		1,375			-		-			1,375
Commercial paper		-		3			-		-			3
Cash equivalents total		263		2,541			-		-			2,804
Available-for-sale securities:
Debt instruments:
U.S. government and agency obligations		1,754		35			-		-			1,789
Municipal debt securities		-		11			-		-			11
Certificates of deposit		-		2,199			-		-			2,199
Corporate debt securities		181		197			8		-			386
Mortgage-backed securities:
U.S. government agency		-		44			-		-			44
Non-agency residential		-		-			2		-			2
Non-agency commercial		-		-			41		-			41
Asset-backed securities		-		-			35		-			35
Equity instruments:
Fixed income mutual funds:
Fixed income mutual funds measured at net asset value		-		-			-		-			659
Total return bond funds		1,512		-			-		-			1,512
Available-for-sale securities total		3,447		2,486			86		-			6,678
Derivative assets:
Interest rate swaps		-		491			12		-			503
Interest rate floors		-		2			-		-			2
Foreign currency swaps		-		276			-		-			276
Counterparty netting and collateral		-		-			-		(720	)		(720	)
Derivative assets total		-		769			12		(720	)		61
Assets at fair value		3,710		5,796			98		(720	)		9,543
Derivative liabilities:
Interest rate swaps		-		(271	)		-		-			(271	)
Foreign currency swaps		-		(598	)		-		-			(598	)
Counterparty netting and collateral		-		-			-		855			855
Liabilities at fair value		-		(869	)		-		855			(14	)
Net assets at fair value	$	3,710	$	4,927		$	98	$	135		$	9,529

Note 2 – Fair Value Measurements (Continued)

	March 31, 2017
									Counterparty
									netting &			Fair
	Level 1		Level 2			Level 3			collateral			value
Cash equivalents:
Money market instruments	$	287	$	1,045		$	-		$	-		$	1,332
Certificates of deposit		-		2,630			-			-			2,630
Cash equivalents total		287		3,675			-			-			3,962
Available-for-sale securities:
Debt instruments:
U.S. government and agency obligations		2,273		33			2			-			2,308
Municipal debt securities		-		11			-			-			11
Certificates of deposit		105		650			-			-			755
Corporate debt securities		211		150			8			-			369
Mortgage-backed securities:
U.S. government agency		-		45			-			-			45
Non-agency residential		-		-			2			-			2
Non-agency commercial		-		-			37			-			37
Asset-backed securities		-		-			31			-			31
Equity instruments:
Fixed income mutual funds:
Fixed income mutual funds measured at net asset value		-		-			-			-			1,740
Total return bond funds		394		-			-			-			394
Available-for-sale securities total		2,983		889			80			-			5,692
Derivative assets:
Interest rate swaps		-		474			1			-			475
Interest rate floors		-		2			-			-			2
Foreign currency swaps		-		122			-			-			122
Counterparty netting and collateral		-		-			-			(548	)		(548	)
Derivative assets total		-		598			1			(548	)		51
Assets at fair value		3,270		5,162			81			(548	)		9,705
Derivative liabilities:
Interest rate swaps		-		(271	)		(6	)		-			(277	)
Foreign currency swaps		-		(1,114	)		(62	)		-			(1,176	)
Counterparty netting and collateral		-		-			-			1,407			1,407
Liabilities at fair value		-		(1,385	)		(68	)		1,407			(46	)
Net assets at fair value	$	3,270	$	3,777		$	13		$	859		$	9,659

Note 2 – Fair Value Measurements (Continued)

Transfers between levels of the fair value hierarchy are recognized at the end of their respective reporting periods. Transfers between levels of the fair value hierarchy during the three months ended June 30, 2017 and 2016 resulted from changes in the transparency of inputs and were not significant.

The following tables summarize the rollforward of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs:

	Three Months Ended June 30, 2017
																								Total net
																								assets
	Available-for-sale securities														Derivative instruments, net									(liabilities)

	U.S.											Total									Total
	government			Corporate		Mortgage-			Asset-			available-			Interest			Foreign			derivative
	and agency			debt		backed			backed			for-sale			rate			currency			assets
	obligations			securities		securities			securities			securities			swaps			swaps			(liabilities)
Fair value, April 1, 2017	$	2		$	8	$	39		$	31		$	80		$	(5	)	$	(62	)	$	(67	)	$	13
Total gains (losses)
Included in earnings	-			-		-			-				-			13			7			20			20
Included in other comprehensive income	-			-		-			-				-			-			-			-			-
Purchases, issuances, sales, and settlements
Purchases	-			-			5			11			16			-			-			-			16
Issuances	-			-		-			-				-			-			-			-			-
Sales	-			-		-			-				-			-			-			-			-
Settlements	-			-			(1	)		(7	)		(8	)		4			55			59			51
Transfers in to Level 3	-			-		-			-				-			-			-			-			-
Transfers out of Level 3		(2	)	-		-			-				(2	)		-			-			-			(2	)
Fair value, June 30, 2017	$	-		$	8	$	43		$	35		$	86		$	12		$	-		$	12		$	98
The amount of total gains (losses) included in earnings attributable to assets held at the reporting date															$	13		$	-			13			13

	Three Months Ended June 30, 2016
																						Total net
																						assets
	Available-for-sale securities													Derivative instruments, net								(liabilities)

	U.S.										Total								Total
	government		Corporate		Mortgage-			Asset-			available-			Interest		Foreign			derivative
	and agency		debt		backed			backed			for-sale			rate		currency			assets
	obligations		securities		securities			securities			securities			swaps		swaps			(liabilities)
Fair value, April 1, 2016	$	2	$	7	$	45		$	37		$	91		$	39	$	(14	)	$	25		$	116
Total gains (losses)
Included in earnings		-		-		-			-			-			20		(24	)		(4	)		(4	)
Included in other comprehensive income		-		-		1			-			1			-		-			-			1
Purchases, issuances, sales, and settlements
Purchases		-		-		-			2			2			-		-			-			2
Issuances		-		-		-			-			-			-		-			-			-
Sales		-		-		-			-			-			-		-			-			-
Settlements		-		-		(1	)		(4	)		(5	)		3		(4	)		(1	)		(6	)
Transfers in to Level 3		-		-		-			-			-			-		-			-			-
Transfers out of Level 3		-		-		-			-			-			-		-			-			-
Fair value, June 30, 2016	$	2	$	7	$	45		$	35		$	89		$	62	$	(42	)	$	20		$	109
The amount of total gains (losses) included in earnings attributable to assets held at the reporting date														$	20	$	(24	)	$	(4	)	$	(4	)

Note 2 – Fair Value Measurements (Continued)

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 June 30, 2017 and March 31, 2017.

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 change in the fair value measurements of these assets and liabilities, were not significant to our Consolidated Balance Sheets or Consolidated Statements of Income as of and for the three months ended June 30, 2017 and as of and for the year ended March 31, 2017.

Note 2 – 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:

	June 30, 2017
	Carrying								Total Fair
	value		Level 1		Level 2		Level 3		Value

Financial assets
Finance receivables, net
Retail loan	$	50,623	$	-	$	-	$	50,644	$	50,644
Wholesale		11,082		-		-		11,139		11,139
Real estate		4,653		-		-		4,599		4,599
Working capital		2,260		-		-		2,280		2,280

Financial liabilities
Commercial paper	$	26,498	$	-	$	26,498	$	-	$	26,498
Unsecured notes and loans payable		58,465		-		57,402		2,063		59,465
Secured notes and loans payable		13,813		-		-		13,832		13,832

	March 31, 2017
	Carrying								Total Fair
	value		Level 1		Level 2		Level 3		Value

Financial assets
Finance receivables, net
Retail loan	$	50,682	$	-	$	-	$	50,733	$	50,733
Wholesale		10,819		-		-		10,881		10,881
Real estate		4,602		-		-		4,459		4,459
Working capital		2,218		-		-		2,222		2,222

Financial liabilities
Commercial paper	$	26,632	$	-	$	26,632	$	-	$	26,632
Unsecured notes and loans payable		57,282		-		55,838		2,385		58,223
Secured notes and loans payable		14,319		-		-		14,322		14,322

The carrying value of each class of finance receivables includes accrued interest and deferred fees and costs, net of deferred income and the allowance for credit losses. Finance receivables, net, excludes related party transactions, for which the fair value approximates the carrying value, of $148 million and $136 million at June 30, 2017 and March 31, 2017, respectively.