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.

	September 30, 2018
									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	$	2,112	$	18		$	-		$	-		$	2,130
Municipal debt securities	-			10			-			-			10
Corporate debt securities	-			176			-			-			176
Mortgage-backed securities:
U.S. government agency	-			35			-			-			35
Non-agency residential	-		-				2			-			2
Non-agency commercial	-		-				28			-			28
Asset-backed securities	-		-				46			-			46
Available-for-sale debt securities total		2,112		239			76			-			2,427
Equity investments:
Fixed income mutual funds:
Fixed income mutual funds measured at net asset value													657
Total return bond funds		1,519		-			-			-			1,519
Equity investments total		1,519		-			-			-			2,176
Investments in marketable securities total		3,631		239			76			-			4,603
Derivative assets:
Interest rate swaps		-		889			-			-			889
Foreign currency swaps		-		105			-			-			105
Counterparty netting and collateral		-		-			-			(945	)		(945	)
Derivative assets total		-		994			-			(945	)		49
Assets at fair value		3,631		1,233			76			(945	)		4,652
Derivative liabilities:
Interest rate swaps		-		(778	)		(59	)		-			(837	)
Foreign currency swaps		-		(696	)		-			-			(696	)
Counterparty netting and collateral		-		-			-			1,502			1,502
Liabilities at fair value		-		(1,474	)		(59	)		1,502			(31	)
Net assets at fair value	$	3,631	$	(241	)	$	17		$	557		$	4,621

Note 2 – Fair Value Measurements (Continued)

	March 31, 2018
									Counterparty
									netting &			Fair
	Level 1		Level 2			Level 3			collateral			value
Available-for-sale securities:
Debt securities:
U.S. government and agency obligations	$	2,774	$	24		$	-		$	-		$	2,798
Municipal debt securities		-		11			-			-			11
Certificates of deposit		-		474			-			-			474
Commercial paper		-		52			-			-			52
Corporate debt securities		15		186			-			-			201
Mortgage-backed securities:
U.S. government agency		-		39			-			-			39
Non-agency residential		-		-			2			-			2
Non-agency commercial		-		-			29			-			29
Asset-backed securities		-		-			39			-			39
Equity investments:
Fixed income mutual funds:
Fixed income mutual funds measured at net asset value													660
Total return bond funds		1,524		-			-			-			1,524
Available-for-sale securities total		4,313		786			70			-			5,829
Derivative assets:
Interest rate swaps		-		872			-			-			872
Interest rate floors		-		1			-			-			1
Foreign currency swaps		-		485			-			-			485
Counterparty netting and collateral		-		-			-			(1,297	)		(1,297	)
Derivative assets total		-		1,358			-			(1,297	)		61
Assets at fair value		4,313		2,144			70			(1,297	)		5,890
Derivative liabilities:
Interest rate swaps		-		(607	)		(21	)		-			(628	)
Foreign currency swaps		-		(200	)		-			-			(200	)
Counterparty netting and collateral		-		-			-			822			822
Liabilities at fair value		-		(807	)		(21	)		822			(6	)
Net assets at fair value	$	4,313	$	1,337		$	49		$	(475	)	$	5,884

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 and six months ended September 30, 2018 and 2017 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 September 30, 2018
												Total net
									Derivative			assets
	Available-for-sale debt securities								instruments, net			(liabilities)

						Total
	Mortgage-		Asset-			available-			Interest
	backed		backed			for-sale debt			rate
	securities		securities			securities			swaps
Fair value, July 1, 2018	$	25	$	38		$	63		$	(23	)	$	40
Total gains (losses)
Included in net income	-		-				-			(10	)		(10	)
Included in other comprehensive income	-		-				-			-			-
Purchases, issuances, sales, and settlements
Purchases		5		18			23			-			23
Issuances	-		-				-			-			-
Sales	-			(4	)		(4	)		-			(4	)
Settlements	-			(6	)		(6	)		(26	)		(32	)
Transfers in to Level 3	-		-				-			-			-
Transfers out of Level 3	-		-				-			-			-
Fair value, September 30, 2018	$	30	$	46		$	76		$	(59	)	$	17
The amount of total gains (losses) included in net income attributable to assets held at the reporting date									$	(10	)	$	(10	)

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

									Total
	Corporate		Mortgage-			Asset-			available-			Interest
	debt		backed			backed			for-sale			rate
	securities		securities			securities			securities			swaps
Fair value, July 1, 2017	$	8	$	43		$	35		$	86		$	12		$	98
Total gains (losses)
Included in net income		-		-			-			-			5			5
Included in other comprehensive income		-		-			1			1			-			1
Purchases, issuances, sales, and settlements
Purchases		-		-			5			5			-			5
Issuances		-		-			-			-			-			-
Sales		-		-			-			-			-			-
Settlements		-		(3	)		(5	)		(8	)		(29	)		(37	)
Transfers in to Level 3		-		-			-			-			-			-
Transfers out of Level 3		-		-			-			-			-			-
Fair value, September 30, 2017	$	8	$	40		$	36		$	84		$	(12	)	$	72
The amount of total gains (losses) included in net income attributable to assets held at the reporting date												$	5		$	5

Note 2 – Fair Value Measurements (Continued)

	Six Months Ended September 30, 2018
													Total net
										Derivative			assets
	Available-for-sale debt securities									instruments, net			(liabilities)

							Total
	Mortgage-			Asset-			available-			Interest
	backed			backed			for-sale			rate
	securities			securities			securities			swaps
Fair value, April 1, 2018	$	31		$	39		$	70		$	(21	)	$	49
Total gains (losses)
Included in net income	-			-				-			(18	)		(18	)
Included in other comprehensive income	-			-				-			-			-
Purchases, issuances, sales, and settlements
Purchases		5			20			25			-			25
Issuances	-			-				-			-			-
Sales	-				(4	)		(4	)		-			(4	)
Settlements		(6	)		(9	)		(15	)		(20	)		(35	)
Transfers in to Level 3	-			-				-			-			-
Transfers out of Level 3	-			-				-			-			-
Fair value, September 30, 2018	$	30		$	46		$	76		$	(59	)	$	17
The amount of total gains (losses) included in net income attributable to assets held at the reporting date										$	(18	)	$	(18	)

	Six Months Ended September 30, 2017
																								Total net
															Derivative									assets
	Available-for-sale securities														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 net income		-			-		-			-			-			18			7			25			25
Included in other comprehensive income		-			-		-			1			1			-			-			-			1
Purchases, issuances, sales, and settlements
Purchases		-			-		5			16			21			-			-			-			21
Issuances		-			-		-			-			-			-			-			-			-
Sales		-			-		-			-			-			-			-			-			-
Settlements		-			-		(4	)		(12	)		(16	)		(25	)		55			30			14
Transfers in to Level 3		-			-		-			-			-			-			-			-			-
Transfers out of Level 3		(2	)		-		-			-			(2	)		-			-			-			(2	)
Fair value, September 30, 2017	$	-		$	8	$	40		$	36		$	84		$	(12	)	$	-		$	(12	)	$	72
The amount of total gains (losses) included in net income attributable to assets held at the reporting date															$	18		$	-		$	18		$	18

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 September 30, 2018 and March 31, 2018.

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 and six months ended September 30, 2018 and as of and for the year ended March 31, 2018.

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:

	September 30, 2018
	Carrying								Total Fair
	value		Level 1		Level 2		Level 3		Value

Financial assets
Finance receivables, net
Retail loan	$	52,926	$	-	$	-	$	52,444	$	52,444
Wholesale		9,514		-		-		9,557		9,557
Real estate		4,421		-		-		4,366		4,366
Working capital		2,288		-		-		2,314		2,314

Financial liabilities
Commercial paper	$	25,287	$	-	$	25,287	$	-	$	25,287
Unsecured notes and loans payable		58,412		-		56,229		2,297		58,526
Secured notes and loans payable		14,529		-		-		14,499		14,499

	March 31, 2018
	Carrying								Total Fair
	value		Level 1		Level 2		Level 3		Value

Financial assets
Finance receivables, net
Retail loan	$	52,374	$	-	$	-	$	52,081	$	52,081
Wholesale		10,365		-		-		10,413		10,413
Real estate		4,492		-		-		4,409		4,409
Working capital		2,222		-		-		2,197		2,197

Financial liabilities
Commercial paper	$	27,313	$	-	$	27,313	$	-	$	27,313
Unsecured notes and loans payable		57,402		-		55,441		2,341		57,782
Secured notes and loans payable		13,638		-		-		13,588		13,588

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 $175 million and $189 million at September 30, 2018 and March 31, 2018, respectively. Fair values of related party finance receivables, net are classified as Level 3 of 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 of the fair value hierarchy.