10. Fair Value Measurements
The following tables present the fair values for assets and (liabilities) measured on a recurring basis at June 30:
| | | | | | | | | | | | | | | | | | | | | | | |
| 2025 |
| (in millions) | Level 1 | | Level 2 | | Level 3 | | Total |
| Assets: | | | | | | | |
| Cash equivalents | $ | 1,672 | | | $ | — | | | $ | — | | | $ | 1,672 | |
| | | | | | | |
| Other investments (1) | 108 | | | — | | | — | | | 108 | |
| Liabilities: | | | | | | | |
| Forward contracts (2) | — | | | (48) | | | — | | | (48) | |
| Share-based awards (3) | — | | | — | | | (843) | | | (843) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| 2024 |
| (in millions) | Level 1 | | Level 2 | | Level 3 | | Total |
| Assets: | | | | | | | |
| Cash equivalents | $ | 1,442 | | | $ | — | | | $ | — | | | $ | 1,442 | |
| | | | | | | |
| Other investments (1) | 108 | | | — | | | — | | | 108 | |
| | | | | | | |
| Liabilities: | | | | | | | |
| | | | | | | |
| Forward contracts (2) | — | | | (87) | | | — | | | (87) | |
(1)The other investments balance includes investments in mutual funds, which offset fluctuations in deferred compensation liabilities. These mutual funds invest in the equity securities of companies with both large and small market capitalization and high-quality fixed income debt securities. The fair value of these investments is determined using quoted market prices.
(2)The fair value of interest rate swaps, foreign currency contracts, and net investment hedges is determined based on the present value of expected future cash flows considering the risks involved, including non-performance
risk, and using discount rates appropriate for the respective maturities. Observable Level 2 inputs are used to determine the present value of expected future cash flows. The fair value of these derivative contracts, which are subject to master netting arrangements under certain circumstances, is presented on a gross basis in prepaid expenses and other, other assets, other accrued liabilities, and deferred income taxes and other liabilities within the consolidated balance sheets.
(3)The shared-based awards are comprised of liability-classified awards, as defined under ASC 718, resulting from the acquisition of GIA. The fair value of the GIA Units is determined using the discounted cash flow method. These are presented in deferred income taxes and other liabilities within the consolidated balance sheets. See Note 15 for additional information. About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.