The financial statements of P&G are presented below.

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?

2016 2017 $ 65,058 32,535 18,568 $ 65,299 32,909 18,949 2015 $ 70,749 37,056 20,616 2,028 13,441 579 182 11,049 626 149 440 325 13,369 11,012 13,955 465 171 (404) 13,257 3,063 10,194 5,217 15,411 85 $ 15,326 3,342 Amounts in millions except per share amounts; Years ended June 30 NET SALES Cost of products sold Selling, general and administrative expense Venezuela deconsolidation charge OPERATING INCOME Interest expense Interest income Other non-operating income/expense), net EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES Income taxes on continuing operations NET EARNINGS FROM CONTINUING OPERATIONS NET EARNINGS/(LOSS) FROM DISCONTINUED OPERATIONS NET EARNINGS Less: Net earnings attributable to noncontrolling interests NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE BASIC NET EARNINGS PER COMMON SHARE:(1) Earnings from continuing operations Earnings/loss) from discontinued operations BASIC NET EARNINGS PER COMMON SHARE DILUTED NET EARNINGS PER COMMON SHARE:(1) Earnings from continuing operations Earnings/(loss) from discontinued operations DILUTED NET EARNINGS PER COMMON SHARE DIVIDENDS PER COMMON SHARE 10,027 577 10,604 2,725 8,287 (1,143) 7,144 108 96 $ 10,508 $ 7,036 $ 3.79 CA 3.59 $ 2.01 0.21 2.92 (0.42) 2.50 S 5.80 3.80 $ $ $ 3.49 $ 3.69 1.90 5.59 0.20 2.84 (0.40) 2.44 $ $ $ 3.69 2.66 2.70 $ $ 2.59 (1) Basic net earnings per common share and Diluted net earnings per common share are calculated on Net earnings attributable to Procter & Gamble. 2017 2016 $ 10,604 2015 $ 7,144 $ 15,411 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 $o 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 (1,679) 1 28 (1,477) (3,127) 7,477 96 $ 7,381 (7,220) 1,234 24 844 (5,118) 2,026 108 $ 1,918 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 PROPERTY, PLANT AND EQUIPMENT, NET GOODWILL TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET OTHER NONCURRENT ASSETS TOTAL ASSETS 1,308 529 2,787 4,624 1,188 563 2,965 4,716 2,139 26,494 19,893 44,699 24,187 5,133 $ 120,406 1,507 2,653 7,185 33,782 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 20 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 (34) 4 30 ESOP debt impacts 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 Other comprehensive loss 1,275 1,275 (6,989) (247) (14,625) 2,981 Dividends to shareholders: Common (6,989) Preferred, net of tax benefits (247) Treasury purchases (2) (164,866) (14,625) Employee plan issuances 45,848 (77) 3,058 Preferred stock conversions 4,241 (32) 4 28 ESOP debt impacts 41 81 Noncontrolling interest, net BALANCE JUNE 30, 2017 2,553,297 $4,009 $1,006 $63,641 ($1,249) ($14,632) ($93,715) $96,124 (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). 122 (133) (133) $594 $55,778 2017 2016 2015 $ 6,836 $ 8,548 $ 7,102 15,411 2,820 543 10,604 3,078 7,144 3,134 351 (601) (5,490) 335 (815) (41) 337 (803) (766) 2,028 450 2,174 349 35 116 313 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 Change in inventories Change in accounts payable, accrued and other liabilities Change in other operating assets and liabilities Other TOTAL OPERATING ACTIVITIES INVESTING ACTIVITIES Capital expenditures Proceeds from asset sales Cash related to deconsolidated Venezuela operations Acquisitions, net of cash acquired Purchases of short-term investments Proceeds from sales and maturities of short-term investments Pre-divestiture addition of restricted cash related to the Beauty Brands divestiture Cash transferred at closing related to the Beauty Brands divestiture Release of restricted cash upon closing of the Beauty Brands divestiture Cash transferred in Batteries divestiture Change in other investments TOTAL INVESTING ACTIVITIES (322) 71 (149) (43) 162 1,285 204 184 15,435 928 (976) 746 14,608 12,753 (3,384) 571 (3,314) 432 (3,736) 4,498 (908) (137) (3,647) (16) (4,843) 1,488 (874) (475) 1,870 (186) (2,815) 1,354 (996) 1,203 (26) (5,689) (143) 93 (5,575) (163) (2,890) FINANCING ACTIVITIES Dividends to shareholders (7,236) (7,436) (7,287) Change in short-term debt 2,727 (418) (2,580) Additions to long-term debt 3,603 3,916 2,138 Reductions of long-term debt (4,931)(1) (2,213) (3,512) Treasury stock purchases (5,204) (4,004) (4,604) Treasury stock from cash infused in Batteries divestiture (1,730) Impact of stock options and other 2,473 2,672 2,826 TOTAL FINANCING ACTIVITIES (8,568) (9,213) (13,019) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (29) (381) (411) CHANGE IN CASH AND CASH EQUIVALENTS (1,533) 266 (1,712) CASH AND CASH EQUIVALENTS, END OF YEAR $ 5,569 $ 7,102 $ 6,836 SUPPLEMENTAL DISCLOSURE Cash payments for interest $ $ 569 $ 678 Cash payment for income taxes 3,714 3,730 4,558 Divestiture of Batteries business in exchange for shares of P&G stock(2) 4,213 Divestiture of Beauty business in exchange for shares of P&G stock and assumption of debt 11,360 Assets acquired through non-cash capital leases are immaterial for all periods. (1) Includes $543 of costs related to early extinguishment of debt. (2) Includes $1,730 from cash infused into the Batteries business pursuant to the divestiture agreement (see Note 13). 518 2016 2017 $ 65,058 32,535 18,568 $ 65,299 32,909 18,949 2015 $ 70,749 37,056 20,616 2,028 13,441 579 182 11,049 626 149 440 325 13,369 11,012 13,955 465 171 (404) 13,257 3,063 10,194 5,217 15,411 85 $ 15,326 3,342 Amounts in millions except per share amounts; Years ended June 30 NET SALES Cost of products sold Selling, general and administrative expense Venezuela deconsolidation charge OPERATING INCOME Interest expense Interest income Other non-operating income/expense), net EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES Income taxes on continuing operations NET EARNINGS FROM CONTINUING OPERATIONS NET EARNINGS/(LOSS) FROM DISCONTINUED OPERATIONS NET EARNINGS Less: Net earnings attributable to noncontrolling interests NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE BASIC NET EARNINGS PER COMMON SHARE:(1) Earnings from continuing operations Earnings/loss) from discontinued operations BASIC NET EARNINGS PER COMMON SHARE DILUTED NET EARNINGS PER COMMON SHARE:(1) Earnings from continuing operations Earnings/(loss) from discontinued operations DILUTED NET EARNINGS PER COMMON SHARE DIVIDENDS PER COMMON SHARE 10,027 577 10,604 2,725 8,287 (1,143) 7,144 108 96 $ 10,508 $ 7,036 $ 3.79 CA 3.59 $ 2.01 0.21 2.92 (0.42) 2.50 S 5.80 3.80 $ $ $ 3.49 $ 3.69 1.90 5.59 0.20 2.84 (0.40) 2.44 $ $ $ 3.69 2.66 2.70 $ $ 2.59 (1) Basic net earnings per common share and Diluted net earnings per common share are calculated on Net earnings attributable to Procter & Gamble. 2017 2016 $ 10,604 2015 $ 7,144 $ 15,411 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 $o 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 (1,679) 1 28 (1,477) (3,127) 7,477 96 $ 7,381 (7,220) 1,234 24 844 (5,118) 2,026 108 $ 1,918 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 PROPERTY, PLANT AND EQUIPMENT, NET GOODWILL TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET OTHER NONCURRENT ASSETS TOTAL ASSETS 1,308 529 2,787 4,624 1,188 563 2,965 4,716 2,139 26,494 19,893 44,699 24,187 5,133 $ 120,406 1,507 2,653 7,185 33,782 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 20 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 (34) 4 30 ESOP debt impacts 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 Other comprehensive loss 1,275 1,275 (6,989) (247) (14,625) 2,981 Dividends to shareholders: Common (6,989) Preferred, net of tax benefits (247) Treasury purchases (2) (164,866) (14,625) Employee plan issuances 45,848 (77) 3,058 Preferred stock conversions 4,241 (32) 4 28 ESOP debt impacts 41 81 Noncontrolling interest, net BALANCE JUNE 30, 2017 2,553,297 $4,009 $1,006 $63,641 ($1,249) ($14,632) ($93,715) $96,124 (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). 122 (133) (133) $594 $55,778 2017 2016 2015 $ 6,836 $ 8,548 $ 7,102 15,411 2,820 543 10,604 3,078 7,144 3,134 351 (601) (5,490) 335 (815) (41) 337 (803) (766) 2,028 450 2,174 349 35 116 313 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 Change in inventories Change in accounts payable, accrued and other liabilities Change in other operating assets and liabilities Other TOTAL OPERATING ACTIVITIES INVESTING ACTIVITIES Capital expenditures Proceeds from asset sales Cash related to deconsolidated Venezuela operations Acquisitions, net of cash acquired Purchases of short-term investments Proceeds from sales and maturities of short-term investments Pre-divestiture addition of restricted cash related to the Beauty Brands divestiture Cash transferred at closing related to the Beauty Brands divestiture Release of restricted cash upon closing of the Beauty Brands divestiture Cash transferred in Batteries divestiture Change in other investments TOTAL INVESTING ACTIVITIES (322) 71 (149) (43) 162 1,285 204 184 15,435 928 (976) 746 14,608 12,753 (3,384) 571 (3,314) 432 (3,736) 4,498 (908) (137) (3,647) (16) (4,843) 1,488 (874) (475) 1,870 (186) (2,815) 1,354 (996) 1,203 (26) (5,689) (143) 93 (5,575) (163) (2,890) FINANCING ACTIVITIES Dividends to shareholders (7,236) (7,436) (7,287) Change in short-term debt 2,727 (418) (2,580) Additions to long-term debt 3,603 3,916 2,138 Reductions of long-term debt (4,931)(1) (2,213) (3,512) Treasury stock purchases (5,204) (4,004) (4,604) Treasury stock from cash infused in Batteries divestiture (1,730) Impact of stock options and other 2,473 2,672 2,826 TOTAL FINANCING ACTIVITIES (8,568) (9,213) (13,019) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (29) (381) (411) CHANGE IN CASH AND CASH EQUIVALENTS (1,533) 266 (1,712) CASH AND CASH EQUIVALENTS, END OF YEAR $ 5,569 $ 7,102 $ 6,836 SUPPLEMENTAL DISCLOSURE Cash payments for interest $ $ 569 $ 678 Cash payment for income taxes 3,714 3,730 4,558 Divestiture of Batteries business in exchange for shares of P&G stock(2) 4,213 Divestiture of Beauty business in exchange for shares of P&G stock and assumption of debt 11,360 Assets acquired through non-cash capital leases are immaterial for all periods. (1) Includes $543 of costs related to early extinguishment of debt. (2) Includes $1,730 from cash infused into the Batteries business pursuant to the divestiture agreement (see Note 13). 518