Procter & Gamble Company (P&G) The financial statements of P&G are presented in Appendix B. The company's complete annual report, including the notes to the financial statements, is available online. Instructions Refer to P&G's financial statements and the accompanying notes to answer the following questions using proper accounting terminology / referenced.

a. What investments does P&G report in 2017, and how are these investments accounted for in its financial statements?

b. How are P&G's investments valued? How does P&G determine fair value?

c. How does P&G use derivative financial instruments?

2017 2016 2015 $ 7,144 $ 15,411 $ 10,604 (1,679) 1 Consolidated Statements of Comprehensive Income Amounts in millions; Years ended June 30 NET EARNINGS OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX Financial statement translation Unrealized gains/(losses) on hedges (net of $(186), $5 and $739 tax, respectively) Unrealized gains/(losses) on investment securities (net of $(6), $7 and $0 tax, respectively) Unrealized gains/(losses) on defined benefit retirement plans (net of $551, $(621) and $328 tax, respectively) TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX TOTAL COMPREHENSIVE INCOME Less: Total comprehensive income attributable to noncontrolling interests TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO PROCTER & GAMBLE 239 (306) (59) 1,401 1,275 16,686 85 $ 16,601 28 (1,477) (3,127) 7,477 96 $ 7,381 (7,220) 1,234 24 844 (5,118) 2,026 108 $ 1,918 Consolidated Balance Sheets 2017 2016 $ $ 5,569 9,568 4,594 7,102 6,246 4,373 Amounts in millions; As of June 30 Assets CURRENT ASSETS Cash and cash equivalents Available-for-sale investment securities Accounts receivable INVENTORIES Materials and supplies Work in process Finished goods Total inventoreis Deferred income taxes Prepaid expenses and other current assets Current assets held for sale TOTAL CURRENT ASSETS 1,308 529 2,787 4,624 1,188 563 2,965 4,716 1,507 2,653 7,185 33,782 2,139 26,494 PROPERTY, PLANT AND EQUIPMENT, NET GOODWILL TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET OTHER NONCURRENT ASSETS TOTAL ASSETS 19,893 44,699 24,187 5,133 $ 120,406 19,385 44,350 24,527 5,092 $ 127,136 $ $ 9,632 7,024 13,554 30,210 18,038 8,126 8,254 64,628 9,325 7,449 2,343 11,653 30,770 18,945 9,113 10,325 69,153 Liabilities and Shareholders' Equity CURRENT LIABILITIES Accounts payable Accrued and other liabilities Current liabilities held for sale Debt due within one year TOTAL CURRENT LIABILITIES LONG-TERM DEBT DEFERRED INCOME TAXES OTHER NONCURRENT LIABILITIES TOTAL LIABILITIES SHAREHOLDERS' EQUITY Convertible Class A preferred stock, stated value $1 per share (600 shares authorized) Non-Voting Class B preferred stock, stated value $1 per share (200 shares authorized) Common stock, stated value $1 per share (10,000 shares authorized; shares issued: 2017 - 4,009.2, 2016 - 4,009.2) Additional paid-in capital Reserve for ESOP debt retirement Accumulated other comprehensive income/(loss) Treasury stock, at cost (shares held: 2017 - 1,455.9, 2016 - 1,341.2) Retained earnings Noncontrolling interest TOTAL SHAREHOLDERS' EQUITY TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,006 1,038 4,009 63,641 (1,249) (14,632) (93,715) 96,124 594 55,778 $ 120,406 4,009 63,714 (1,290) (15,907) (82,176) 87,953 642 57,983 $ 127,136 (34) Consolidated Statements of Shareholders' Equity Accumulated Other Total Common Additional Reserve for Comprehensive Non- Share- Dollars in millions; Shares Common Preferred Paid-In ESOP Debt Income Treasury Retained controlling holders' Shares in thousands Outstanding Stock Stock Capital Retirement (Loss) Stock Earnings Interest Equity BALANCE JUNE 30, 2014 2,710,806 $4,009 $1,111 $63,911 ($1,340) ($7,662) ($75,805) $84,990 $762 $69,976 Net earnings 7,036 108 7,144 Other comprehensive loss (5,118) (5,118) Dividends to shareholders: Common (7,028) (7,028) Preferred, net of tax benefits (259) (259) Treasury purchases (54,670) (4,604) (4,604) Employee plan issuances 54,100 156 3,153 3,309 Preferred stock conversions 4,335 4 30 ESOP debt impacts 20 68 88 Noncontrolling interest, net (219) (239) (458) BALANCE JUNE 30, 2015 2,714,571 $4,009 $1,077 $63,852 ($1,320) ($12,780) ($77,226) $84,807 $631 $63,050 Net earnings 10,508 96 10,604 Other comprehensive loss (3,127) (3,127) Dividends to shareholders: Common (7,181) (7,181) Preferred, net of tax benefits (255) (255) Treasury purchases (1) (103,449) (8,217) (8,217) Employee plan issuances 52,089 (144) 3,234 3,090 Preferred stock conversions 4,863 (39) 6 33 ESOP debt impacts 30 74 104 Noncontrolling interest, net (85) (85) BALANCE JUNE 30, 2016 2,668,074 $4,009 $1,038 $63,714 ($1,290) ($15,907) ($82,176) $87,953 $642 $57.983 Net earnings 15,326 85 15,411 15,326 85 15,411 1,275 1,275 (6,989) (247) Net earnings Other comprehensive loss Dividends to shareholders: Common Preferred, net of tax benefits Treasury purchases (2) Employee plan issuances Preferred stock conversions ESOP debt impacts Noncontrolling interest, net BALANCE JUNE 30, 2017 (6,989) (247) (14,625) 2,981 (164,866) 45,848 4,241 (77) (14,625) 3,058 28 (32) 4 41 81 122 (133) (133) $594 $55,778 2,553,297 $4,009 $1,006 $63,641 ($1,249) ($14,632) ($93,715) 596,124 (1) Includes $4,213 of treasury shares acquired in the divestiture of the Batteries business (see Note 13). (2) Includes $9,421 of treasury shares received as part of the share exchange in the Beauty Brands transaction (see Note 13). See accompanying Notes to Consolidated Financial Statements. Consolidated Statements of Cash Flows 2017 2016 2015 $ 7,102 $ 6,836 $ 8,548 15,411 2,820 10,604 3,078 7,144 3,134 Amounts in millions; Years ended June 30 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR OPERATING ACTIVITIES Net earnings Depreciation and amortization Loss on early extinguishment of debt Share-based compensation expense Deferred income taxes Gain on sale of assets Venezuela deconsolidation charge Goodwill and intangible asset impairment charges Change in accounts receivable 543 351 (601) (5,490) 335 (815) (41) 337 (803) (766) 2,028 2,174 349 450 35 (322) 2017 2016 2015 $ 7,144 $ 15,411 $ 10,604 (1,679) 1 Consolidated Statements of Comprehensive Income Amounts in millions; Years ended June 30 NET EARNINGS OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX Financial statement translation Unrealized gains/(losses) on hedges (net of $(186), $5 and $739 tax, respectively) Unrealized gains/(losses) on investment securities (net of $(6), $7 and $0 tax, respectively) Unrealized gains/(losses) on defined benefit retirement plans (net of $551, $(621) and $328 tax, respectively) TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX TOTAL COMPREHENSIVE INCOME Less: Total comprehensive income attributable to noncontrolling interests TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO PROCTER & GAMBLE 239 (306) (59) 1,401 1,275 16,686 85 $ 16,601 28 (1,477) (3,127) 7,477 96 $ 7,381 (7,220) 1,234 24 844 (5,118) 2,026 108 $ 1,918 Consolidated Balance Sheets 2017 2016 $ $ 5,569 9,568 4,594 7,102 6,246 4,373 Amounts in millions; As of June 30 Assets CURRENT ASSETS Cash and cash equivalents Available-for-sale investment securities Accounts receivable INVENTORIES Materials and supplies Work in process Finished goods Total inventoreis Deferred income taxes Prepaid expenses and other current assets Current assets held for sale TOTAL CURRENT ASSETS 1,308 529 2,787 4,624 1,188 563 2,965 4,716 1,507 2,653 7,185 33,782 2,139 26,494 PROPERTY, PLANT AND EQUIPMENT, NET GOODWILL TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET OTHER NONCURRENT ASSETS TOTAL ASSETS 19,893 44,699 24,187 5,133 $ 120,406 19,385 44,350 24,527 5,092 $ 127,136 $ $ 9,632 7,024 13,554 30,210 18,038 8,126 8,254 64,628 9,325 7,449 2,343 11,653 30,770 18,945 9,113 10,325 69,153 Liabilities and Shareholders' Equity CURRENT LIABILITIES Accounts payable Accrued and other liabilities Current liabilities held for sale Debt due within one year TOTAL CURRENT LIABILITIES LONG-TERM DEBT DEFERRED INCOME TAXES OTHER NONCURRENT LIABILITIES TOTAL LIABILITIES SHAREHOLDERS' EQUITY Convertible Class A preferred stock, stated value $1 per share (600 shares authorized) Non-Voting Class B preferred stock, stated value $1 per share (200 shares authorized) Common stock, stated value $1 per share (10,000 shares authorized; shares issued: 2017 - 4,009.2, 2016 - 4,009.2) Additional paid-in capital Reserve for ESOP debt retirement Accumulated other comprehensive income/(loss) Treasury stock, at cost (shares held: 2017 - 1,455.9, 2016 - 1,341.2) Retained earnings Noncontrolling interest TOTAL SHAREHOLDERS' EQUITY TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,006 1,038 4,009 63,641 (1,249) (14,632) (93,715) 96,124 594 55,778 $ 120,406 4,009 63,714 (1,290) (15,907) (82,176) 87,953 642 57,983 $ 127,136 (34) Consolidated Statements of Shareholders' Equity Accumulated Other Total Common Additional Reserve for Comprehensive Non- Share- Dollars in millions; Shares Common Preferred Paid-In ESOP Debt Income Treasury Retained controlling holders' Shares in thousands Outstanding Stock Stock Capital Retirement (Loss) Stock Earnings Interest Equity BALANCE JUNE 30, 2014 2,710,806 $4,009 $1,111 $63,911 ($1,340) ($7,662) ($75,805) $84,990 $762 $69,976 Net earnings 7,036 108 7,144 Other comprehensive loss (5,118) (5,118) Dividends to shareholders: Common (7,028) (7,028) Preferred, net of tax benefits (259) (259) Treasury purchases (54,670) (4,604) (4,604) Employee plan issuances 54,100 156 3,153 3,309 Preferred stock conversions 4,335 4 30 ESOP debt impacts 20 68 88 Noncontrolling interest, net (219) (239) (458) BALANCE JUNE 30, 2015 2,714,571 $4,009 $1,077 $63,852 ($1,320) ($12,780) ($77,226) $84,807 $631 $63,050 Net earnings 10,508 96 10,604 Other comprehensive loss (3,127) (3,127) Dividends to shareholders: Common (7,181) (7,181) Preferred, net of tax benefits (255) (255) Treasury purchases (1) (103,449) (8,217) (8,217) Employee plan issuances 52,089 (144) 3,234 3,090 Preferred stock conversions 4,863 (39) 6 33 ESOP debt impacts 30 74 104 Noncontrolling interest, net (85) (85) BALANCE JUNE 30, 2016 2,668,074 $4,009 $1,038 $63,714 ($1,290) ($15,907) ($82,176) $87,953 $642 $57.983 Net earnings 15,326 85 15,411 15,326 85 15,411 1,275 1,275 (6,989) (247) Net earnings Other comprehensive loss Dividends to shareholders: Common Preferred, net of tax benefits Treasury purchases (2) Employee plan issuances Preferred stock conversions ESOP debt impacts Noncontrolling interest, net BALANCE JUNE 30, 2017 (6,989) (247) (14,625) 2,981 (164,866) 45,848 4,241 (77) (14,625) 3,058 28 (32) 4 41 81 122 (133) (133) $594 $55,778 2,553,297 $4,009 $1,006 $63,641 ($1,249) ($14,632) ($93,715) 596,124 (1) Includes $4,213 of treasury shares acquired in the divestiture of the Batteries business (see Note 13). (2) Includes $9,421 of treasury shares received as part of the share exchange in the Beauty Brands transaction (see Note 13). See accompanying Notes to Consolidated Financial Statements. Consolidated Statements of Cash Flows 2017 2016 2015 $ 7,102 $ 6,836 $ 8,548 15,411 2,820 10,604 3,078 7,144 3,134 Amounts in millions; Years ended June 30 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR OPERATING ACTIVITIES Net earnings Depreciation and amortization Loss on early extinguishment of debt Share-based compensation expense Deferred income taxes Gain on sale of assets Venezuela deconsolidation charge Goodwill and intangible asset impairment charges Change in accounts receivable 543 351 (601) (5,490) 335 (815) (41) 337 (803) (766) 2,028 2,174 349 450 35 (322)