Item 8. Financial Statements and Supplementary Data

Table of Contents
			Page
Reports of Management			48
Reports of Independent Registered Public Accounting Firm			49
Consolidated Statements of Operations			52
Consolidated Statements of Comprehensive Income			53
Consolidated Balance Sheets			54
Consolidated Statements of Cash Flows			55
Consolidated Statements of Stockholders’ Equity			56
Notes to Consolidated Financial Statements			57

Reports of Management

Management’s Responsibility for Financial Statements

Our management is responsible for preparing, presenting, and ensuring the integrity of the financial information presented in this report. The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States, including amounts based on management’s best estimates and judgments. In management’s opinion, the consolidated financial statements fairly present the Company’s financial position, results of operations, and cash flows.

The Audit Committee of the Board of Directors, comprising only independent directors, meets regularly with our external auditors, the independent registered public accounting firm Ernst & Young LLP (EY); with our internal auditors; and with representatives of management to review accounting, internal control structure, and financial reporting matters. Our internal auditors and EY have full access to the Audit Committee. As set forth in our Code of Conduct and Corporate Governance Guidelines, we are firmly committed to adhering to the highest standards of moral and ethical behavior in our business activities.

Management’s Report on Internal Control over Financial Reporting

Management is also responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

As permitted by the SEC staff guidance on newly acquired businesses, management’s assessment of the effectiveness of internal control over financial reporting did not include internal controls of Gin Mare or Diplomático (the acquired businesses). Total assets of the acquired businesses (excluding goodwill and intangible assets) constituted approximately 2% of the Company’s consolidated total assets as of April 30, 2023. Total net sales of the acquired businesses constituted less than 1% of the Company’s consolidated net sales for the year ended April 30, 2023.

As of the end of our fiscal year, management conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework and criteria in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that our internal control over financial reporting was effective as of April 30, 2023. EY, which audited and reported on the Company’s consolidated financial statements, has audited the effectiveness of our internal control over financial reporting as of April 30, 2023, as stated in their report.

Dated:			June 16, 2023
						By:			/s/ Lawson E. Whiting
									Lawson E. Whiting
									President and Chief Executive Officer
						By:			/s/ Leanne D. Cunningham
									Leanne D. Cunningham
									Executive Vice President and Chief Financial Officer

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Brown-Forman Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Brown-Forman Corporation and Subsidiaries (the Company) as of April 30, 2023 and 2022, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended April 30, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at April 30, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended April 30, 2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of April 30, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated June 16, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

						Valuation of the Finlandia Brand Name Other Intangible Asset
Description of the Matter						At April 30, 2023, the balance of the Company’s other intangible assets with indefinite lives was $1,164 million. As discussed in Notes 1 and 4 to the consolidated financial statements, other intangible assets with indefinite lives include intangible brand names and trademarks (“brand names”) and are assessed for impairment at least annually, or more frequently, if circumstances indicate the carrying amount may be impaired. As described in Note 4, the Company recognized an impairment charge of $96 million for its Finlandia brand name. The Company determined Finlandia’s fair value based on the relief-from-royalty method. Auditing management’s estimate of the fair value of the Finlandia brand name was complex due to the significant judgment required to determine the fair value of the brand name. The fair value estimate was sensitive to significant assumptions used in the valuation process, such as future net sales. The estimate also includes assumptions such as discount rates and royalty rates.

How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of controls that address the risks of material misstatement over the Company’s process to estimate the fair value of the Finlandia brand name, including controls over management’s review of the selection of assumptions, described above, used in the valuation model. To test the estimated fair value of the Company’s Finlandia brand name, we performed audit procedures that included, among others, assessing methodologies used in the valuation model and testing the significant assumptions discussed above. This included comparing the significant assumptions used by management to observable market data, current industry and economic trends, changes in the Company’s business model and customer base, historical operating results, and other relevant factors that would affect the significant assumptions. We assessed management’s historical estimates and performed sensitivity analyses of assumptions to evaluate the changes in the fair value of the Finlandia brand name that would result from changes in the assumptions. We also involved valuation specialists to assist in evaluating valuation methodologies and certain assumptions used in the model.
						Valuation of Intangible Assets for Gin Mare and Diplomático
Description of the Matter						During 2023, the Company completed its acquisition of Diplomático for consideration of $727 million in cash and its acquisition of Gin Mare for consideration of $468 million in cash paid at the acquisition date plus contingent consideration of $56 million, as disclosed in Note 12 to the consolidated financial statements. The transactions were accounted for as business combinations. Auditing the Company's accounting for its acquisitions of Diplomático and Gin Mare was complex due to the significant judgement required in the Company’s determination of the preliminary fair value of identified intangible assets of $312 million for Diplomático and $307 million for Gin Mare, which primarily consisted of brand names and trademarks (“acquired brand names”). The preliminary fair value estimates were sensitive to significant assumptions used in the valuation process, such as future net sales and discount rates. The estimates also included assumptions such as royalty rates.
How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of controls that address the risks of material misstatement over the Company’s process to estimate the preliminary fair value of the acquired brand names, including controls over management’s review of the selection of assumptions, described above, used in the valuation models. To test the estimated preliminary fair values of the acquired brand names, we performed audit procedures that included, among others, assessing methodologies used in the valuation models and testing the significant assumptions discussed above. This included comparing the significant assumptions used by management to observable market data, current industry and economic trends, historical operating results of similar brands and other relevant factors that would affect the significant assumptions. We performed sensitivity analyses of certain assumptions to evaluate the changes in the preliminary fair value of the acquired brand names that would result from changes in the assumptions. We also involved valuation specialists to assist in evaluating valuation methodologies and certain assumptions used in the models.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2020.

Louisville, Kentucky

June 16, 2023

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Brown-Forman Corporation

Opinion on Internal Control Over Financial Reporting

We have audited Brown-Forman Corporation and Subsidiaries’ internal control over financial reporting as of April 30, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria). In our opinion, Brown-Forman Corporation and Subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of April 30, 2023, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Gin Mare or Diplomático, which are included in the 2023 consolidated financial statements of the Company and constituted 2% of total assets as of April 30, 2023, excluding goodwill and intangibles, and less than 1% of net sales for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Gin Mare or Diplomático.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of April 30, 2023 and 2022, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended April 30, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) and our report dated June 16, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Louisville, Kentucky

June 16, 2023

Brown-Forman Corporation and Subsidiaries

Consolidated Statements of Operations

(Dollars in millions, except per share amounts)

Year Ended April 30,			2021						2022						2023
Sales			$	4,526					$	5,081					$	5,372
Excise taxes			1,065						1,148						1,144
Net sales			3,461						3,933						4,228
Cost of sales			1,367						1,542						1,734
Gross profit			2,094						2,391						2,494
Advertising expenses			399						438						506
Selling, general, and administrative expenses			671						690						742
Gain on sale of business			(127)						—						—
Other expense (income), net			(15)						59						119
Operating income			1,166						1,204						1,127
Non-operating postretirement expense			6						13						29
Interest income			(2)						(5)						(9)
Interest expense			81						82						90
Income before income taxes			1,081						1,114						1,017
Income taxes			178						276						234
Net income			$	903					$	838					$	783
Earnings per share:
Basic			$	1.89					$	1.75					$	1.63
Diluted			$	1.88					$	1.74					$	1.63

The accompanying notes are an integral part of the consolidated financial statements.

Brown-Forman Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Dollars in millions)

Year Ended April 30,			2021						2022						2023
Net income			$	903					$	838					$	783
Other comprehensive income (loss), net of tax:
Currency translation adjustments			123						(60)						135
Cash flow hedge adjustments			(76)						53						(27)
Postretirement benefits adjustments			78						77						9
Net other comprehensive income (loss)			125						70						117
Comprehensive income			$	1,028					$	908					$	900

The accompanying notes are an integral part of the consolidated financial statements.

Brown-Forman Corporation and Subsidiaries

Consolidated Balance Sheets

(Dollars in millions)

April 30,			2022						2023
Assets
Cash and cash equivalents			$	868					$	374
Accounts receivable, net			813						855
Inventories:
Barreled whiskey			1,155						1,262
Finished goods			312						509
Work in process			225						321
Raw materials and supplies			126						191
Total inventories			1,818						2,283
Other current assets			277						289
Total current assets			3,776						3,801
Property, plant, and equipment, net			875						1,031
Goodwill			761						1,457
Other intangible assets			586						1,164
Deferred tax assets			74						66
Other assets			301						258
Total assets			$	6,373					$	7,777
Liabilities
Accounts payable and accrued expenses			$	703					$	827
Accrued income taxes			81						22
Short-term borrowings			—						235
Current portion of long-term debt			250						—
Total current liabilities			1,034						1,084
Long-term debt			2,019						2,678
Deferred tax liabilities			219						323
Accrued pension and other postretirement benefits			183						171
Other liabilities			181						253
Total liabilities			3,636						4,509
Commitments and contingencies
Stockholders’ Equity
Common stock:
Class A, voting, $0.15 par value (170,000,000 shares authorized; 170,000,000 shares issued)			25						25
Class B, nonvoting, $0.15 par value (400,000,000 shares authorized; 314,532,000 shares issued)			47						47
Additional paid-in capital			—						1
Retained earnings			3,242						3,643
Accumulated other comprehensive income (loss), net of tax			(352)						(235)
Treasury stock, at cost (5,511,000 and 5,215,000 shares in 2022 and 2023, respectively)			(225)						(213)
Total stockholders' equity			2,737						3,268
Total liabilities and stockholders' equity			$	6,373					$	7,777

The accompanying notes are an integral part of the consolidated financial statements.

Brown-Forman Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars in millions)

Year Ended April 30,			2021						2022						2023
Cash flows from operating activities:
Net income			$	903					$	838					$	783
Adjustments to reconcile net income to net cash provided by operations:
Gain on sale of business			(127)						—						—
Asset impairment charges			—						61						96
Depreciation and amortization			77						79						80
Stock-based compensation expense			12						15						18
Deferred income tax provision (benefit)			(53)						(11)						(3)
Other, net			(23)						31						18
Changes in assets and liabilities, net of business acquisitions and dispositions:
Accounts receivable			(150)						(77)						(21)
Inventories			(37)						(93)						(403)
Other current assets			31						15						4
Accounts payable and accrued expenses			137						37						77
Accrued income taxes			8						47						(57)
Other operating assets and liabilities			39						(6)						48
Cash provided by operating activities			817						936						640
Cash flows from investing activities:
Proceeds from sale of business			177						—						—
Business acquisitions, net of cash acquired			(14)						—						(1,195)
Additions to property, plant, and equipment			(62)						(138)						(183)
Other, net			(3)						11						23
Cash provided by (used for) investing activities			98						(127)						(1,355)
Cash flows from financing activities:
Proceeds from short-term borrowings, maturities greater than 90 days			344						—						600
Repayments of short-term borrowings, maturities greater than 90 days			(516)						—						(600)
Net change in other short-term borrowings			46						(196)						234
Repayment of long-term debt			—						—						(250)
Proceeds from long-term debt			—						—						648
Dividends paid			(338)						(831)						(378)
Other, net			(21)						(11)						(15)
Cash provided by (used for) financing activities			(485)						(1,038)						239
Effect of exchange rate changes on cash, cash equivalents, and restricted cash			45						(47)						(14)
Net increase (decrease) in cash, cash equivalents, and restricted cash			475						(276)						(490)
Cash, cash equivalents, and restricted cash at beginning of period			675						1,150						874
Cash, cash equivalents, and restricted cash at end of period			1,150						874						384
Less: Restricted cash (included in other current assets) at end of period			—						(6)						(10)
Cash and cash equivalents at end of period			$	1,150					$	868					$	374
Supplemental disclosure of cash paid for:
Interest			$	79					$	80					$	85
Income taxes			$	204					$	226					$	278

The accompanying notes are an integral part of the consolidated financial statements.

Brown-Forman Corporation and Subsidiaries

Consolidated Statements of Stockholders' Equity

(Dollars in millions, except per share amounts)

			Class A Common Stock						Class B Common Stock						Additional Paid-in Capital						Retained Earnings						AOCI						Treasury Stock						Total
Balance at April 30, 2020			$	25					$	47					$	—					$	2,708					$	(547)					$	(258)					$	1,975
Net income																					903																		903
Net other comprehensive income (loss)																											125												125
Cash dividends ($0.7076 per share)																					(338)																		(338)
Stock-based compensation expense															12																								12
Stock issued under compensation plans																																	21						21
Loss on issuance of treasury stock issued under compensation plans															(12)						(30)																		(42)
Balance at April 30, 2021			25						47						—						3,243						(422)						(237)						2,656
Net income																					838																		838
Net other comprehensive income (loss)																											70												70
Cash dividends ($1.7360 per share)																					(831)																		(831)
Stock-based compensation expense															15																								15
Stock issued under compensation plans																																	12						12
Loss on issuance of treasury stock issued under compensation plans															(15)						(8)																		(23)
Balance at April 30, 2022			25						47						—						3,242						(352)						(225)						2,737
Net income																					783																		783
Net other comprehensive income (loss)																											117												117
Cash dividends ($0.7880 per share)																					(378)																		(378)
Stock-based compensation expense															18																								18
Stock issued under compensation plans																																	12						12
Loss on issuance of treasury stock issued under compensation plans															(17)						(4)																		(21)
Balance at April 30, 2023			$	25					$	47					$	1					$	3,643					$	(235)					$	(213)					$	3,268

The accompanying notes are an integral part of the consolidated financial statements.

Brown-Forman Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars and other currency amounts in millions, except per share data)

1. Accounting Policies

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States (GAAP). We also apply the following accounting policies when preparing our consolidated financial statements:

Principles of consolidation. Our consolidated financial statements include the accounts of all subsidiaries in which we have a controlling financial interest. We eliminate all intercompany transactions.

Estimates. To prepare financial statements that conform with GAAP, our management must make informed estimates that affect how we report revenues, expenses, assets, and liabilities, including contingent assets and liabilities. Actual results could differ from these estimates.

Cash equivalents. Cash equivalents include bank demand deposits and all highly liquid investments with original maturities of three months or less.

Accounts receivable. Accounts receivable are recorded net of an allowance for expected credit losses (allowance for doubtful accounts). We determine the allowance using information such as customer credit history and financial condition, historical loss experience, and macroeconomic factors. We write off account balances against the allowance when we have exhausted our collection efforts. The allowance for doubtful accounts was $13 and $7 at April 30, 2022 and 2023, respectively.

Inventories. Inventories are valued at the lower of cost or net realizable value. Approximately 49% of our consolidated inventories are valued using the last-in, first-out (LIFO) cost method, which we use for the majority of our U.S. inventories. We value the remainder of our inventories primarily using the first-in, first-out (FIFO) cost method. FIFO cost approximates current replacement cost. If we had used the FIFO method for all inventories, they would have been $385 and $429 higher than reported at April 30, 2022 and 2023, respectively.

Because we age most of our whiskeys in barrels for three years or more, we bottle and sell only a portion of our whiskey inventory each year. Following industry practice, we classify all barreled whiskey as a current asset. We include warehousing, insurance, ad valorem taxes, and other carrying charges applicable to barreled whiskey in inventory costs.

We classify agave inventories, bulk tequila, bulk wine, and liquid in bottling tanks as work in process.

Property, plant, and equipment. We state property, plant, and equipment at cost less accumulated depreciation. We calculate depreciation on a straight-line basis using our estimates of useful life, which are 20–40 years for buildings and improvements; 3–10 years for machinery, equipment, vehicles, furniture, and fixtures; and 3–7 years for capitalized software.

We assess our property, plant, and equipment for impairment whenever events or changes in circumstances indicate that the carrying value of those assets may not be recoverable. When we do not expect to recover the carrying value of an asset (or asset group) through undiscounted future cash flows, we write it down to its estimated fair value. We determine fair value using discounted estimated future cash flows, considering market values for similar assets when available.

When we retire or dispose of property, plant, and equipment, we remove its cost and accumulated depreciation from our balance sheet and reflect any gain or loss in operating income. We expense the costs of repairing and maintaining our property, plant, and equipment as we incur them.

Goodwill and other intangible assets. When we acquire a business, we first allocate the purchase price to identifiable assets and liabilities, including intangible brand names and trademarks (“brand names”), based on estimated fair value. We then record any remaining purchase price as goodwill. We do not amortize goodwill or other intangible assets with indefinite lives. We consider all of our brand names to have indefinite lives.

We assess our goodwill and other indefinite-lived intangible assets for impairment at least annually, or more frequently if circumstances indicate the carrying amount may be impaired. Goodwill is impaired when the carrying amount of the related reporting unit exceeds its estimated fair value, in which case we write down the goodwill by the amount of the excess (limited to the carrying amount of the goodwill). We estimate the reporting unit's fair value using discounted estimated future cash flows or market information. Similarly, a brand name is impaired when its carrying amount exceeds its estimated fair value, in which case we write down the brand name to its estimated fair value. We estimate the fair value of a brand name using the relief-from-royalty method. We also consider market values for similar assets when available. Considerable management judgment is

necessary to estimate fair value, including the selection of assumptions about future cash flows, net sales, discount rates, and royalty rates.

We have the option, before quantifying the fair value of a reporting unit or brand name, to evaluate qualitative factors to assess whether it is more likely than not that our goodwill or brand names are impaired. If we determine that is not the case, then we are not required to quantify the fair value. That assessment also takes considerable management judgment.

Revenue recognition. Our net sales predominantly reflect global sales of beverage alcohol consumer products. We sell these products under contracts with different types of customers, depending on the market. The customer is most often a distributor, wholesaler, or retailer.

Each contract typically includes a single performance obligation to transfer control of the products to the customer. Depending on the contract, control is transferred when the products are either shipped or delivered to the customer, at which point we recognize the transaction price for those products as net sales. The transaction price recognized at that point reflects our estimate of the consideration to be received in exchange for the products. The actual amount may ultimately differ due to the effect of various customer incentives and trade promotion activities. In making our estimates, we consider our historical experience and current expectations, as applicable. Subsequent adjustments recognized for changes in estimated transaction prices are typically not material.

Net sales exclude taxes we collect from customers that are imposed by various governments on our sales, and are reduced by payments to customers unless made in exchange for distinct goods or services with fair values approximating the payments. Net sales include any amounts we bill customers for shipping and handling activities related to the products. We recognize the cost of those activities in cost of sales during the same period in which we recognize the related net sales. Sales returns, which are permitted only in limited situations, are not material. Customer payment terms generally range from 30 to 90 days. There are no significant amounts of contract assets or liabilities.

Cost of sales. Cost of sales includes the costs of receiving, producing, inspecting, warehousing, insuring, and shipping goods sold during the period.

Advertising costs. We expense the production costs of advertising when the advertisements first take place. We expense all other advertising costs during the year in which the costs are incurred.

Selling, general, and administrative expenses. Selling, general, and administrative expenses include the costs associated with our sales force, administrative staff and facilities, and other expenses related to our non-manufacturing functions.

Stock-based compensation. We use stock-based awards as part of our incentive compensation for eligible employees and directors. We recognize the grant-date fair value of an award as compensation expense on a straight-line basis over the requisite service period, which typically corresponds to the vesting period for the award. Upon forfeiture of an award prior to vesting, we reverse any previously recognized compensation expense related to that award. We classify stock-based compensation expense within selling, general, and administrative expenses.

As we recognize compensation expense for a stock-based award, we concurrently recognize a related deferred tax asset. The subsequent vesting or exercise of the award will generally result in an actual tax benefit that differs from the deferred tax asset that had been recorded. The excess (deficiency) of the actual tax benefit over (under) the previously recorded tax asset is recognized as income tax benefit (expense) on the date of vesting or exercise.

Income taxes. We base our annual provision for income taxes on the pre-tax income reflected in our consolidated statement of operations. We establish deferred tax liabilities or assets for temporary differences between GAAP and tax reporting bases and later adjust them to reflect changes in tax rates expected to be in effect when the temporary differences reverse. We record a valuation allowance as necessary to reduce a deferred tax asset to the amount that we believe is more likely than not to be realized. We do not provide deferred income taxes on undistributed earnings of foreign subsidiaries that we expect to indefinitely reinvest. We record a deferred tax charge in prepaid taxes for the difference between GAAP and tax reporting bases with respect to the elimination of intercompany profit in ending inventory.

We assess our uncertain income tax positions in two steps. First, we evaluate whether the tax position will more likely than not, based on its technical merits, be sustained upon examination, including resolution of any related appeals or litigation. For a tax position that does not meet this first criterion, we recognize no tax benefit. For a tax position that does meet the first criterion, we recognize a tax benefit in an amount equal to the largest amount of benefit that we believe has more than a 50% likelihood of being realized upon ultimate resolution. We record interest and penalties on uncertain tax positions as income tax expense.

Foreign currency transactions and translation. We report all gains and losses from foreign currency transactions (those denominated in a currency other than the entity's functional currency) in current income. The U.S. dollar is the functional currency for most of our consolidated entities. The local currency is the functional currency for some of our consolidated foreign entities. We translate the financial statements of those foreign entities into U.S. dollars, using the exchange rate in effect at the balance sheet date to translate assets and liabilities, and using the average exchange rate for the reporting period to translate income and expenses. We record the resulting translation adjustments in other comprehensive income (loss).

2. Balance Sheet Information

Supplemental information on our year-end balance sheets is as follows:

April 30,			2022						2023
Other current assets:
Prepaid taxes			$	155					$	122
Other			122						167
			$	277					$	289
Property, plant, and equipment:
Land			$	86					$	97
Buildings			660						717
Equipment			849						889
Construction in process			129						217
			1,724						1,920
Less accumulated depreciation			849						889
			$	875					$	1,031
Accounts payable and accrued expenses:
Accounts payable, trade			$	218					$	308
Accrued expenses:
Advertising, promotion, and discounts			200						216
Compensation and commissions			99						106
Excise and other non-income taxes			74						76
Other			112						121
			485						519
			$	703					$	827
Other liabilities:
Contingent consideration (Note 12)			$	—					$	56
Other			181						197
			$	181					$	253
Accumulated other comprehensive income (loss), net of tax:
Currency translation adjustments			$	(239)					$	(104)
Cash flow hedge adjustments			37						10
Postretirement benefits adjustments			(150)						(141)
			$	(352)					$	(235)

3. Earnings per Share

We calculate basic earnings per share by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share further includes the dilutive effect of stock-based compensation awards. We calculate that dilutive effect using the “treasury stock method” (as defined by GAAP).

The following table presents information concerning basic and diluted earnings per share:

			2021						2022						2023
Net income available to common stockholders			$	903					$	838					$	783
Share data (in thousands):
Basic average common shares outstanding			478,527						478,879						479,155
Dilutive effect of stock-based awards			2,150						1,686						1,310
Diluted average common shares outstanding			480,677						480,565						480,465
Basic earnings per share			$	1.89					$	1.75					$	1.63
Diluted earnings per share			$	1.88					$	1.74					$	1.63

We excluded common stock-based awards for approximately 234,000 shares, 691,000 shares, and 1,107,000 shares from the calculation of diluted earnings per share for 2021, 2022, and 2023, respectively, because they were not dilutive for those periods under the treasury stock method.

4. Goodwill and Other Intangible Assets

The following table shows the changes in goodwill (which include no accumulated impairment losses) and other intangible assets over the past two years:

			Goodwill						Other Intangible Assets
Balance as of April 30, 2021			$	779					$	676
Foreign currency translation adjustment			(18)						(38)
Impairment			—						(52)
Balance as of April 30, 2022			761						586
Acquisitions (Note 12)			652						619
Foreign currency translation adjustment			44						55
Impairment			—						(96)
Balance as of April 30, 2023			$	1,457					$	1,164

Our other intangible assets consist of trademarks and brand names, all with indefinite useful lives.

During fiscal 2022, we recognized a non-cash impairment charge of $52 for the Finlandia brand name. The impairment reflected a decline in our long-term outlook for Finlandia due to our suspension of operations in Russia, a key market for the brand. During fiscal 2023, we recognized an additional non-cash impairment charge of $96 for the Finlandia brand name, largely reflecting the effects of higher discount rates and input costs on its valuation. The impairment charges are included in “other expense (income), net” in the accompanying consolidated statements of operations. As of April 30, 2023, the remaining carrying amount of the Finlandia brand name was $91.

5. Contingencies

We operate in a litigious environment, and we are sued in the normal course of business. Sometimes plaintiffs seek substantial damages. Significant judgment is required in predicting the outcome of these suits and claims, many of which take years to adjudicate. We accrue estimated costs for a contingency when we believe that a loss is probable and we can make a reasonable estimate of the loss, and then adjust the accrual as appropriate to reflect changes in facts and circumstances. We do not believe it is reasonably possible that these existing loss contingencies, individually or in the aggregate, would have a material adverse effect on our financial position, results of operations, or liquidity. No material accrued loss contingencies are recorded as of April 30, 2023.

6. Debt and Credit Facilities

Our long-term debt (net of unamortized discounts and issuance costs) consisted of:

April 30,			2022						2023
2.25% senior notes, $250 principal amount, due January 15, 2023			$	250					$	—
3.50% senior notes, $300 principal amount, due April 15, 2025			298						299
1.20% senior notes, €300 principal amount, due July 7, 2026			315						330
2.60% senior notes, £300 principal amount, due July 7, 2028			374						375
4.75% senior notes, $650 principal amount, due April 15, 2033			—						642
4.00% senior notes, $300 principal amount, due April 15, 2038			295						295
3.75% senior notes, $250 principal amount, due January 15, 2043			248						248
4.50% senior notes, $500 principal amount, due July 15, 2045			489						489
			2,269						2,678
Less current portion			250						—
			$	2,019					$	2,678

On January 3, 2023, we entered into a $600 senior unsecured 364-day term loan credit agreement with various U.S. and international banks. This credit agreement specified a variable interest rate reflecting the Secured Overnight Financing Rate applicable to the term of the particular borrowing plus a margin based on our credit ratings. The weighted-average interest rate on the term loan borrowings was 5.36% until it was repaid in full on March 23, 2023.

On January 15, 2023, we repaid the $250 principal amount of 2.25% senior notes that matured on that date.

On March 23, 2023, we issued senior unsecured notes with an aggregate principal amount of $650. Interest on these notes will accrue at a rate of 4.75% and be paid semi-annually. These notes will mature on April 15, 2033. The net proceeds from the issuance were used to repay $600 of outstanding indebtedness under the unsecured 364-day term loan agreement, dated January 3, 2023.

Debt payments required over the next five fiscal years consist of $0 in 2024, $300 in 2025, $0 in 2026, $331 in 2027, $0 in 2028, and $2,077 after 2028.

The senior notes contain terms, events of default, and covenants customary of these types of unsecured securities, including limitations on the amount of secured debt we can issue.

Our short-term borrowings were $235 as of April 30, 2023 under our commercial paper program. There were no borrowings under that program as of April 30, 2022.

April 30,			2022						2023
Commercial paper			$—						$235
Average interest rate			—%						5.17%
Average remaining days to maturity			0						21

We had a committed revolving credit agreement with various U.S. and international banks for $800 that was scheduled to expire in November 2024. At April 30, 2023, there were no borrowings outstanding under this facility. On May 26, 2023, we entered into an amended and restated five-year credit agreement with various U.S. and international banks that provides for a $900 unsecured revolving credit commitment and expires on May 26, 2028. This agreement amended and restated our previous credit facility agreement. The new agreement contains no financial covenants.

7. Common Stock

The following table shows the change in outstanding common shares during each of the last three years:

(Shares in thousands)			Class A						Class B						Total
Balance at April 30, 2020			169,040						309,169						478,209
Stock issued under compensation plans			70						450						520
Balance at April 30, 2021			169,110						309,619						478,729
Stock issued under compensation plans			65						226						291
Balance at April 30, 2022			169,175						309,845						479,020
Stock issued under compensation plans			65						231						296
Balance at April 30, 2023			169,240						310,076						479,316

8. Net Sales

The following table shows our net sales by geography:

			2021						2022						2023
United States			$	1,748					$	1,917					$	1,968
Developed International1			1,014						1,137						1,183
Emerging2			578						714						842
Travel Retail3			63						104						147
Non-branded and bulk4			58						61						88
			$	3,461					$	3,933					$	4,228

1Represents net sales of branded products to “advanced economies” as defined by the International Monetary Fund (IMF), excluding the United States. Our top developed international markets are Germany, Australia, the United Kingdom, France, Canada, and Japan.

2Represents net sales of branded products to “emerging and developing economies” as defined by the IMF. Our top emerging markets are Mexico, Poland, and Brazil.

3Represents net sales of branded products to global duty-free customers, other travel retail customers, and the U.S. military, regardless of customer location.

4Includes net sales of used barrels, contract bottling services, and bulk whiskey and wine, regardless of customer location.

The following table shows our net sales by product category:

			2021						2022						2023
Whiskey1			$	2,410					$	2,756					$	2,915
Ready-to-Drink2			406						431						509
Tequila3			229						290						320
Wine4			206						219						206
Vodka5			90						109						99
Non-branded and bulk6			58						61						88
Rest of portfolio7			62						67						91
			$	3,461					$	3,933					$	4,228

1Includes all whiskey spirits and whiskey-based flavored liqueurs. The brands included in this category are the Jack Daniel’s family of brands (excluding the “ready-to-drink” products outlined below), the Woodford Reserve family of brands, the Old Forester family of brands, GlenDronach, Benriach, Glenglassaugh, Slane Irish Whiskey, and Coopers’ Craft.

2Includes the Jack Daniel’s ready-to-drink (RTD) and ready-to-pour (RTP) products, New Mix, and other RTD/RTP products.

3Includes the Herradura family of brands, el Jimador, New Mix, and other tequilas.

4Includes Korbel California Champagne and Sonoma-Cutrer wines.

5Includes Finlandia.

6Includes net sales of used barrels, contract bottling services, and bulk whiskey and wine.

7Includes Chambord, Gin Mare, Korbel Brandy, Diplomático, and Fords Gin.

9. Pension and Other Postretirement Benefits

We sponsor various defined benefit pension plans as well as postretirement plans providing retiree health care and retiree life insurance benefits. Below, we discuss our obligations related to these plans, the assets dedicated to meeting the obligations, and the amounts we recognized in our financial statements as a result of sponsoring these plans.

Obligations. We provide eligible employees with pension and other postretirement benefits based on factors such as years of service and compensation level during employment. The pension obligation shown below (“projected benefit obligation”) consists of: (a) benefits earned by employees to date based on current salary levels (“accumulated benefit obligation”); and (b) benefits to be received by employees as a result of expected future salary increases. (The obligation for medical and life insurance benefits is not affected by future salary increases.) The following table shows how the present value of our projected benefit obligations changed during each of the last two years.

			Pension Benefits												Medical and Life Insurance Benefits
			2022						2023						2022						2023
Obligation at beginning of year			$	1,012					$	846					$	49					$	43
Service cost			26						20						1						1
Interest cost			22						32						1						1
Net actuarial loss (gain)1			(132)						(21)						(5)						(2)
Retiree contributions			—						—						1						2
Benefits paid			(82)						(146)						(4)						(5)
Obligation at end of year			$	846					$	731					$	43					$	40

1 The net actuarial loss (gain) during each year was primarily attributable to changes in discount rates.

Service cost represents the present value of the benefits attributed to service rendered by employees during the year. Interest cost is the increase in the present value of the obligation due to the passage of time. Net actuarial loss (gain) is the change in value of the obligation resulting from experience different from that assumed or from a change in an actuarial assumption. (We discuss actuarial assumptions used at the end of this note.) Plan amendments may also change the value of the obligation.

As shown in the previous table, the change in the value of our pension and other postretirement benefit obligations also includes the effect of benefit payments and retiree contributions. Expected benefit payments (net of retiree contributions) over the next 10 years are as follows:

			Pension Benefits						Medical and Life Insurance Benefits
2024			$	53					$	4
2025			52						3
2026			54						3
2027			55						3
2028			56						3
2029 – 2033			287						15

Assets. We invest in specific assets to fund our pension benefit obligations. Our investment goal is to earn a total return that, over time, will grow assets sufficiently to fund our plans' liabilities, after providing appropriate levels of contributions and accepting prudent levels of investment risk. To achieve this goal, plan assets are invested primarily in funds or portfolios of funds managed by outside managers. Investment risk is managed by company policies that require diversification of asset classes, manager styles, and individual holdings. We measure and monitor investment risk through quarterly and annual performance reviews, and through periodic asset/liability studies.

Asset allocation is the most important method for achieving our investment goals and is based on our assessment of the plans' long-term return objectives and the appropriate balances needed for liquidity, stability, and diversification. As of April 30, 2023, our target asset allocation is a mix of 31% public equity investments, 58% fixed income investments, and 11% alternative investments.

The following table shows the fair value of pension plan assets by category as of the end of the last two years. (Fair value levels are defined in Note 14.)

			Level 1						Level 2						Level 3						Total
April 30, 2022
Equity securities			$	78					$	—					$	—					$	78
Limited partnership interest1			—						—						2						2
			$	78					$	—					$	2					80
Investments measured at net asset value:
Commingled trust funds2:
Equity funds																					218
Fixed income funds																					318
Real estate fund																					78
Short-term investments																					6
Limited partnership interests3																					41
Total																					$	741
April 30, 2023
Equity securities			$	35					$	—					$	—					$	35
Cash and temporary investments			2						—						—						2
Limited partnership interest1			—						—						1						1
			$	37					$	—					$	1					38
Investments measured at net asset value:
Commingled trust funds2:
Equity funds																					138
Fixed income funds																					330
Real estate fund																					59
Short-term investments																					2
Limited partnership interests3																					39
Total																					$	606

1 This limited partnership interest was initially valued at cost and has been adjusted to fair value as determined in good faith by management of the partnership using various factors, and does not meet the requirements for reporting at the net asset value (NAV). The valuation requires significant judgment due to the absence of quoted market prices and the inherent lack of liquidity. This limited partnership has a term expiring in September 2023.

2 Commingled trust fund valuations are based on the NAV of the funds as determined by the fund administrators and reviewed by us. NAV represents the underlying assets owned by the fund, minus liabilities and divided by the number of shares or units outstanding. Generally, for commingled trust funds other than real estate, redemptions are permitted daily with no notice period. The real estate fund is redeemable quarterly with 110 days' notice.

3 These limited partnership interests were initially valued at cost and have been adjusted using NAV per audited financial statements. Investments are generally not eligible for immediate redemption and have original terms averaging 10 to 13 years, although those periods may be extended.

The following table shows how the fair value of the Level 3 assets changed during each of the last two years. There were no transfers of assets between Level 3 and either of the other two levels.

																					Level 3
Balance as of April 30, 2021																					$	2
Return on assets held at end of year																					—
Balance as of April 30, 2022																					2
Return on assets held at end of year																					(1)
Balance as of April 30, 2023																					$	1

The following table shows how the total fair value of all pension plan assets changed during each of the last two years. (We do not have assets set aside for postretirement medical or life insurance benefits.)

			Pension Benefits												Medical and Life Insurance Benefits
			2022						2023						2022						2023
Assets at beginning of year			$	836					$	741					$	—					$	—
Actual return on assets			(25)						(7)						—						—
Retiree contributions			—						—						1						2
Company contributions			12						18						3						3
Benefits paid			(82)						(146)						(4)						(5)
Assets at end of year			$	741					$	606					$	—					$	—

We currently expect to contribute $14 to our pension plans and $4 to our postretirement medical and life insurance benefit plans during 2024.

Funded status. The funded status of a plan refers to the difference between its assets and its obligations. The following table shows the funded status of our plans.

			Pension Benefits												Medical and Life Insurance Benefits
April 30,			2022						2023						2022						2023
Assets			$	741					$	606					$	—					$	—
Obligations			(846)						(731)						(43)						(40)
Funded status			$	(105)					$	(125)					$	(43)					$	(40)

The funded status is recorded on the accompanying consolidated balance sheets as follows:

						Pension Benefits												Medical and Life Insurance Benefits
April 30,						2022						2023						2022						2023
Other assets						$	46					$	17					$	—					$	—
Accounts payable and accrued expenses						(8)						(8)						(3)						(3)
Accrued pension and other postretirement benefits						(143)						(134)						(40)						(37)
Net liability						$	(105)					$	(125)					$	(43)					$	(40)
Accumulated other comprehensive income (loss), before tax:
Net actuarial gain (loss)						$	(201)					$	(192)					$	(3)					$	(1)
Prior service credit (cost)						(4)						(4)						2						2
						$	(205)					$	(196)					$	(1)					$	1

The following table compares our pension plans whose accumulated benefit obligations exceed their assets with our pension plans whose assets exceed their accumulated benefit obligations.

			Accumulated Benefit Obligation																		Plan Assets
April 30,			2022						2023																		2022						2023
Plans with accumulated benefit obligation in excess of assets			$	(135)					$	(131)																	$	—					$	—
Plans with assets in excess of accumulated benefit obligation			(623)						(524)																		741						606
Total			$	(758)					$	(655)																	$	741					$	606

The following table compares our pension plans whose projected benefit obligations exceed their assets with our pension plans whose assets exceed their projected benefit obligations.

			Projected Benefit Obligation																		Plan Assets
April 30,			2022						2023																		2022						2023
Plans with projected benefit obligation in excess of assets			$	(150)					$	(190)																	$	—					$	48
Plans with assets in excess of projected benefit obligation			(696)						(541)																		741						558
Total			$	(846)					$	(731)																	$	741					$	606

As noted above, we have no assets set aside for the postretirement medical or life insurance benefit plans.

Pension cost. The following table shows the components of the pension cost recognized during each of the last three years. The amount for each year includes amortization of the prior service cost/credit and net actuarial loss/gain included in accumulated other comprehensive loss as of the beginning of the year.

			Pension Benefits
			2021						2022						2023
Service cost			$	26					$	26					$	20
Interest cost			25						22						32
Expected return on assets			(46)						(45)						(43)
Amortization of:
Prior service cost (credit)			1						1						1
Net actuarial loss (gain)			27						23						9
Settlement charge			—						12						29
Net cost			$	33					$	39					$	48

We determine the expected return on plan assets by applying our long-term rate of return assumption to the market-related value of plan assets, adjusted by earnings on contributions and benefit payments expected to be made during the year. We calculate the market-related value of plan assets by amortizing actual versus expected returns over five years.

We amortize prior service costs and net actuarial gains or losses on straight-line basis over the average remaining service period of the employees expected to receive benefits under the plan. However, for net actuarial gains or losses, we use a corridor approach that amortizes them only to the extent the gain or loss exceeds 10% of the greater of the projected benefit obligation or market-related value of plan assets.

The settlement charges recognized during 2022 and 2023 were triggered by fiscal year-to-date lump-sum payments under certain pension plans surpassing total annual service and interest cost for those plans.

Other postretirement benefits cost. The following table shows the components of the postretirement medical and life insurance benefits cost that we recognized during each of the last three years.

			Medical and Life Insurance Benefits
			2021						2022						2023
Service cost			$	1					$	1					$	1
Interest cost			1						1						1
Amortization of:
Prior service cost (credit)			(3)						(2)						—
Net actuarial loss (gain)			1						1						—
Net cost			$	—					$	1					$	2

We amortize prior service costs and net actuarial gains or losses on straight-line basis over the average remaining service period of the employees expected to receive benefits under the plan.

Other comprehensive income (loss). Prior service cost/credit and net actuarial loss/gain are recognized in other comprehensive income or loss (OCI) during the period in which they arise. These amounts are later amortized from accumulated OCI into pension and other postretirement benefit cost over future periods as described above. The following table shows the pre-tax effect of these amounts on OCI during each of the last three years.

			Pension Benefits																		Medical and Life Insurance Benefits
			2021						2022						2023						2021						2022						2023
Net actuarial gain (loss)			$	69					$	62					$	(29)					$	1					$	5					$	2
Amortization reclassified to earnings:
Prior service cost (credit)			1						1						1						(3)						(2)						—
Net actuarial loss (gain)			27						35						38						1						1						—
Net amount recognized in OCI			$	97					$	98					$	10					$	(1)					$	4					$	2

Assumptions and sensitivity. We use various assumptions to determine the obligations and cost related to our pension and other postretirement benefit plans. The weighted-average assumptions used in computing benefit plan obligations as of the end of the last two years were as follows:

			Pension Benefits												Medical and Life Insurance Benefits
			2022						2023						2022						2023
Discount rate			4.36		%				4.91		%				4.33		%				4.86		%
Rate of salary increase			4.00		%				4.00		%				n/a						n/a
Interest crediting rate			3.06		%				3.69		%				n/a						n/a

The weighted-average assumptions used in computing benefit plan cost during each of the last three years were as follows:

			Pension Benefits																		Medical and Life Insurance Benefits
			2021						2022						2023						2021						2022						2023
Discount rate for service cost			3.49 %						3.36		%				4.52		%				3.59 %						3.49		%				4.50		%
Discount rate for interest cost			2.56 %						2.34		%				4.12		%				2.47 %						2.27		%				3.96		%
Rate of salary increase			4.00 %						4.00		%				4.00		%				n/a						n/a						n/a
Interest crediting rate			3.07 %						3.06		%				3.06		%				n/a						n/a						n/a
Expected return on plan assets			6.50 %						6.25		%				6.25		%				n/a						n/a						n/a

The assumed discount rates are determined using a yield curve based on the interest rates of high-quality debt securities with maturities corresponding to the expected timing of our benefit payments. The service cost and interest cost components are measured by applying the specific spot rates along the yield curve used to measure the benefit obligation at the beginning of the period.

The assumed rate of salary increase reflects the expected average annual increase in salaries as a result of inflation, merit increases, and promotions over the service period of the plan participants.

The assumed interest crediting is based on the greater of the average yield on 30-year Treasury bonds or the minimum rate specified in the applicable pension plan.

The expected return on plan assets represents the long-term rate of return that we assume will be earned over the life of the pension assets. The assumption reflects expected capital market returns for each asset class, which are based on historical returns, adjusted for the expected effects of diversification.

The assumed health care cost trend rates as of the end of the last two years were as follows:

			Medical and Life Insurance Benefits
			2022						2023
Health care cost trend rate assumed for next year			6.10		%				7.23		%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)			4.50		%				4.50		%
Year that the rate reaches the ultimate trend rate			2030						2032

Savings plans. We also sponsor various defined contribution benefit plans that together cover substantially all U.S. employees. Employees can make voluntary contributions in accordance with their respective plans, which include a 401(k) tax deferral option. We match a percentage of each employee's contributions in accordance with plan terms. We expensed $12, $13, and $14 for matching contributions during 2021, 2022, and 2023, respectively.

International plans. The information presented above for defined benefit plans and defined contribution benefit plans reflects amounts for U.S. plans only. Information about similar international plans is not presented due to immateriality.

10. Stock-Based Compensation

The Brown-Forman 2022 Omnibus Compensation Plan (Plan) is our incentive compensation plan, designed to reward participants (including eligible officers, employees, and non-employee directors) for company performance. Under the Plan, we can grant stock-based incentive awards for up to 12,412,433 shares of common stock to eligible participants until July 28, 2032. As of April 30, 2023, awards for approximately 11,844,000 shares remain available for issuance under the Plan. We try to limit the source of shares delivered to participants under the Plan to treasury shares that we purchase from time to time on the open market (in connection with a publicly announced share repurchase program), in private transactions, or otherwise.

Awards granted under the Plan include stock-settled stock appreciation rights (SSARs), performance-based restricted stock units (PBRSUs), and deferred stock units (DSUs).

SSARs. We grant SSARs at an exercise price equal to the closing market price of the underlying stock on the grant date. SSARs become exercisable after three years from the first day of the fiscal year of grant and generally are exercisable for seven years after that date. The following table presents information about SSARs outstanding as of April 30, 2023, and for the year then ended.

			Number of SSARs (in thousands)						Weighted- Average Exercise Price per SSAR						Weighted- Average Remaining Contractual Term (years)						Aggregate Intrinsic Value
Outstanding at April 30, 2022			4,232						$	47.54
Granted			387						73.61
Exercised			(579)						34.58
Forfeited or expired			(30)						70.63
Outstanding at April 30, 2023			4,010						$	51.76					4.8						$	60
Exercisable at April 30, 2023			2,758						$	43.23					3.5						$	60

We use the Black-Scholes pricing model to calculate the grant-date fair value of a SSAR. The weighted-average grant-date fair values and related valuation assumptions for the SSARS granted during each of the last three years were as follows:

			2021						2022						2023
Grant-date fair value			$	14.61					$	16.61					$	20.67
Valuation assumptions:
Expected term (years)			7.0						7.0						7.0
Risk-free interest rate			0.4 %						1.0		%				2.7		%
Expected volatility			23.3 %						24.1		%				24.8		%
Expected dividend yield			1.0 %						1.0		%				1.0		%

The expected term is based on past exercise experience for similar awards. The risk-free interest rate is based on zero-coupon U.S. Treasury rates as of the date of grant. Expected volatility and dividend yield are based on historical data, with consideration of other factors when applicable.

PBRSUs. The PBRSUs vest at the end of a three-year performance period that begins on the first day of the fiscal year of grant. Performance is measured by comparing the three-year cumulative total shareholder return of our Class B common stock to the three-year cumulative total shareholder return of the companies in the Standard & Poor's Consumer Staples Index, with specific payout levels ranging from 50% to 150%. At the end of the performance period, the number of PBRSUs is adjusted for performance, and then adjusted upward to account for dividends paid during the second and third years of the performance period. The resulting PBRSUs are then converted to common shares.

The following table presents information about PBRSUs outstanding as of April 30, 2023, and for the year then ended.

			Number of PBRSUs (in thousands)						Weighted- Average Fair Value at Grant Date
Outstanding at April 30, 2022			270						$	67.02
Granted			110						$	84.75
Adjusted for performance and dividends			(14)						$	56.98
Converted to common shares			(70)						$	56.98
Forfeited			(7)						$	82.42
Outstanding at April 30, 2023			289						$	76.33

We calculate the grant-date fair value of a PBRSU using a Monte Carlo simulation technique. The weighted average grant-date fair values and related valuation assumptions for these awards granted during each of the last three years were as follows:

			2021						2022						2023
Grant-date fair value			$	73.68					$	70.11					$	84.75
Valuation assumptions:
Risk-free interest rate			0.1		%				0.3		%				2.8		%
Expected volatility			29.9		%				29.1		%				29.8		%
Expected dividend yield			1.1		%				1.0		%				1.0		%
Remaining performance period (years) as of grant date			2.8						2.8						2.8

DSUs. DSUs are granted to our non-employee directors. Each DSU represents the right to receive one share of common stock based on the closing price of the shares on the date of grant. Outstanding DSUs are credited with dividend-equivalent DSUs when dividends are paid on our common stock. Each annual grant vests after one year. DSUs are paid out in shares after the completion of a director's tenure on the board plus a six-month waiting period. The director may elect to receive the distribution either in a single lump sum or in ten equal annual installments. As of April 30, 2023, there were approximately 185,000 outstanding DSUs, of which approximately 168,000 were vested.

The grant-date fair value of a DSU is the closing market price of the underlying stock on the grant date. The weighted average grant-date fair values for these awards granted during each of the last three years were as follows:

			2021						2022						2023
Grant-date fair value			$	63.01					$	67.35					$	72.10

Additional information. The pre-tax stock-based compensation expense and related deferred income tax benefits recognized during the last three fiscal years were as follows:

			2021						2022						2023
Pre-tax compensation expense			$	12					$	15					$	18
Deferred tax benefit			2						2						3

As of April 30, 2023, there was $9 of total unrecognized compensation cost related to non-vested stock-based awards. That cost is expected to be recognized over a weighted-average period of 1.4 years. Further information related to our stock-based awards for the last three years is as follows:

			2021						2022						2023
Intrinsic value of SSARs exercised			$	47					$	23					$	19
Fair value of shares vested			13						7						6
Excess tax benefit from exercise / vesting of awards			10						6						4

11. Income Taxes

We incur income taxes on the earnings of our U.S. and foreign operations. The following table, based on the locations of the taxable entities from which sales were derived (rather than the location of customers), presents the U.S. and foreign components of our income before income taxes:

			2021						2022						2023
United States			$	832					$	954					$	841
Foreign			249						160						176
			$	1,081					$	1,114					$	1,017

The income shown above was determined according to GAAP. Because those standards sometimes differ from the tax rules used to calculate taxable income, there are differences between (a) the amount of taxable income and pretax financial income for a year, and (b) the tax bases of assets or liabilities and their amounts as recorded in our financial statements. As a result, we recognize a current tax liability for the estimated income tax payable on the current tax return, deferred tax liabilities (tax on income that will be recognized on future tax returns), and deferred tax assets (tax from deductions that will be recognized on future tax returns) for the estimated effects of the differences mentioned above.

Total income tax expense for a year includes the tax associated with the current tax return (current tax expense) and the change in the net deferred tax asset or liability (deferred tax expense). Our total income tax expense for each of the last three years was as follows:

			2021						2022						2023
Current:
U.S. federal			$	146					$	205					$	157
Foreign			50						64						46
State and local			35						18						34
			231						287						237
Deferred:
U.S. federal			(4)						1						(4)
Foreign			(47)						(9)						6
State and local			(2)						(3)						(5)
			(53)						(11)						(3)
			$	178					$	276					$	234

Our consolidated effective tax rate usually differs from current statutory rates due to the recognition of amounts for events or transactions with no tax consequences. The following table reconciles our effective tax rate to the federal statutory tax rate in the United States:

			Percent of Income Before Taxes
			2021						2022						2023
U.S. federal statutory rate			21.0		%				21.0		%				21.0		%
State taxes, net of U.S. federal tax benefit			2.4		%				1.0		%				2.5		%
Income taxed at other than U.S. federal statutory rate			0.3		%				1.3		%				3.0		%
Prior intercompany sales taxed at higher than current U.S. federal statutory rate			0.2		%				2.0		%				1.0		%
Tax benefit from foreign-derived sales			(1.7		%)				(1.8		%)				(3.0)		%
Adjustments related to prior years			(0.2		%)				0.7		%				(0.5)		%
Excess tax benefits from stock-based awards			(1.0		%)				(0.5		%)				(0.3)		%
Tax rate changes			—		%				0.4		%				—		%
Intercompany transfer of assets			(4.0		%)				—		%				—		%
Valuation allowance			—		%				—		%				(1.3)		%
Other, net			(0.5		%)				0.7		%				0.6		%
Effective rate			16.5		%				24.8		%				23.0		%

Deferred tax assets and liabilities as of the end of each of the last two years were as follows:

April 30,			2022						2023
Deferred tax assets:
Postretirement and other benefits			$	69					$	75
Accrued liabilities and other			36						35
Inventories			40						26
Lease liabilities			20						23
Loss and credit carryforwards			69						62
Total deferred tax assets			234						221
Valuation allowance			(27)						(14)
Total deferred tax assets, net of valuation allowance			207						207
Deferred tax liabilities:
Intangible assets			(219)						(323)
Property, plant, and equipment			(87)						(98)
Right-of-use assets			(20)						(23)
Derivative instruments			(11)						(3)
Other			(15)						(17)
Total deferred tax liabilities			(352)						(464)
Net deferred tax liability			$	(145)					$	(257)

Details of the loss and credit carryforwards and related valuation allowances as of the end of each of the last two years are as follows:

						April 30, 2022																		April 30, 2023
						Gross Amount						Deferred Tax Asset						Valuation Allowance						Gross Amount						Deferred Tax Asset						Valuation Allowance
U.S.						$	53					$	19					$	(8)					$	111					$	20		1			$	(6)
Foreign						241						50						(19)						216						42			2			(8)
						$	294					$	69					$	(27)					$	327					$	62					$	(14)

1As of April 30, 2023, the deferred tax asset amount includes credit carryforwards of $10 that do not expire and loss and credit carryforwards of $10 that expire in varying amounts from 2023 to 2039.

2As of April 30, 2023, the deferred tax asset includes loss carryforwards of $19 that do not expire and $23 that expire in varying amounts over the next 10 years.

As of April 30, 2023, we had approximately $1,617 of undistributed earnings from our foreign subsidiaries ($1,446 at April 30, 2022). These earnings have been previously subject to tax, primarily as a result of the 2017 Tax Cuts and Jobs Act. Historically, we have asserted that the undistributed earnings of our foreign subsidiaries are reinvested indefinitely outside the United States. We continue to maintain indefinite reinvestment assertions for most undistributed earnings of our foreign subsidiaries, and no deferred taxes have been provided on the earnings. For undistributed earnings not considered permanently reinvested, deferred tax liabilities have been provided for any applicable income taxes and withholding taxes payable in various countries, which are not significant. We have also asserted that other outside basis differences related to our foreign subsidiaries are reinvested indefinitely and that the determination of any unrecognized deferred tax liabilities is not practicable due to the complexities in the calculations. The other outside basis differences relate primarily to differences between U.S. GAAP and tax basis that arose through purchase accounting. These basis differences could reverse through sales of foreign subsidiaries or other transactions, none of which are considered probable as of April 30, 2023.

At April 30, 2023, we had $21 of gross unrecognized tax benefits, $17 of which would reduce our effective income tax rate if recognized. A reconciliation of the beginning and ending unrecognized tax benefits follows:

			2021						2022						2023
Unrecognized tax benefits at beginning of year			$	11					$	12					$	14
Additions for tax positions provided in prior periods			1						2						8
Additions for tax positions provided in current period			2						2						3
Settlements of tax positions in the current period			(1)						—						—
Lapse of statutes of limitations			(1)						(2)						(4)
Unrecognized tax benefits at end of year			$	12					$	14					$	21

We file federal income tax returns in the United States and also file tax returns in various state, local and foreign jurisdictions. The major jurisdictions where we are subject to examination by tax authorities include the United States, Australia, Brazil, Germany, Korea, Mexico, Netherlands, Poland and the United Kingdom. We have tax years open for examination from 2013 and forward. Various tax examinations are currently in progress in the United States, for both federal and states, and in certain foreign jurisdictions. In the United States, we are participating in the Internal Revenue Service's Compliance Assurance Program for our fiscal 2023 tax year.

We believe there will be no material change in our gross unrecognized tax benefits in the next 12 months.

12. Acquisitions and Divestitures

Acquisitions. As discussed below, we completed two acquisitions during fiscal 2023. Each acquisition was accounted for as a business combination.

On November 3, 2022, we acquired the Gin Mare and Gin Mare Capri brands through our purchase of 100% of the equity interests of Gin Mare Brand, S.L.U., a Spanish company, and Mareliquid Vantguard, S.L.U., a Spanish company (the “Gin Mare acquisition”). The purchase price of the Gin Mare acquisition was $524, which consisted of $468 in cash paid at the acquisition date plus contingent consideration of $56.

We have preliminarily allocated the purchase price based on management’s estimates and independent valuations as follows:

			Initial Allocation****1						Adjustments						Updated Allocation
Trademarks and brand names (indefinite-lived)			$	308					$	(1)					$	307
Goodwill			288						1						289
Total assets			596						—						596
Deferred tax liabilities			72						—						72
Net assets acquired			$	524					$	—					$	524

1As reported in Note 14 to our condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the quarter ended January 31, 2023.

The contingent consideration of $56 reflects the estimated fair value, at the acquisition date, of contingent future cash payments of up to €90 to the sellers under an “earn-out” provision of the acquisition agreement. We determined the estimated fair value of the contingent consideration using a Monte Carlo simulation, which requires the use of assumptions, such as projected future net sales, discount rates, and volatility rates.

Any contingent consideration earned by the sellers will be payable in cash no earlier than July 2024 and no later than July 2027, depending on when the sellers choose to exercise the right to receive the payment. The amount payable will depend on the achievement of net sales targets for Gin Mare for the latest fiscal year completed prior to the date of exercise by the sellers. The possible payments range from zero to €90 (approximately $89 as of the acquisition date).

At the acquisition date, we also entered into a supply agreement with the sellers for the production and supply of Gin Mare products to us, at market terms, for an initial period of 10 years (subject to subsequent renewal periods).

On January 5, 2023, we acquired the Diplomático and Botucal rum brands through our purchase of (i) 100% of the equity interests of (a) International Rum and Spirits Distributors Unipessoal, Lda., a Portuguese company, (b) Diplomático Branding Unipessoal Lda., a Portuguese company, (c) International Bottling Services, S.A., a Panamanian corporation, and (d) International Rum & Spirits Marketing Solutions, S.L., a Spanish company; and (ii) certain assets of Destilerias Unidas Corp. (the “Diplomático acquisition”). The purchase price of the Diplomático acquisition consisted of cash of $727.

We have preliminarily allocated the purchase price based on management’s estimates and independent valuations as follows:

			Initial Allocation****1						Adjustments						Updated Allocation
Accounts receivable			$	11					$	—					$	11
Inventories			33						3						36
Other current assets			25						—						25
Property, plant, and equipment			36						2						38
Trademarks and brand names (indefinite-lived)			312						—						312
Goodwill			365						(2)						363
Other assets			—						2						2
Total assets			782						5						787
Accounts payable and accrued expenses			10						3						13
Deferred tax liabilities			45						—						45
Other liabilities			—						2						2
Total liabilities			55						5						60
Net assets acquired			$	727					$	—					$	727

1As reported in Note 14 to our condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the quarter ended January 31, 2023.

At the acquisition date, we also entered into a supply agreement with the sellers for their production and supply of rum to us, at market terms, for an initial period of 10 years (subject to subsequent renewal periods).

We allocated the purchase price for each acquisition based on preliminary estimates, which we may revise as asset valuations are finalized and we obtain further information on the fair value of liabilities. The primary matters to be finalized consist of the valuation of certain tangible assets and identifiable intangible assets, any related tax effects, and any resulting impact on residual goodwill.

The amounts preliminarily allocated to trademarks and brand names for each acquisition were estimated using the relief-from-royalty method, which requires the use of significant assumptions, such as discount rates and projected future net sales.

Goodwill is calculated as the excess of the purchase price over the fair value of the net identifiable assets acquired. The goodwill recorded for each acquisition is primarily attributable to the value of leveraging our distribution network and brand-building expertise to grow sales of the acquired brands. For the Gin Mare acquisition, we expect none of the preliminary goodwill of $289 to be deductible for tax purposes. For the Diplomático acquisition, we expect $109 of the preliminary goodwill of $363 to be deductible for tax purposes.

Results for Gin Mare and Diplomático have been included in our consolidated financial statements since their acquisition dates. Pro forma results are not presented as the aggregate impact is not material to our consolidated statements of operations.

In connection with the acquisitions, we recognized transaction expenses of $55 during fiscal 2023. The following table shows the classification of the transaction expenses in the accompanying consolidated statement of operations.

									2023
Selling, general, and administrative expenses									$	11
Other expense (income), net									44
Total transaction expenses									$	55

The transaction expenses largely reflect payments made to terminate certain distribution contracts related to the acquired brands.

Divestiture. On July 31, 2020, we sold the Early Times, Canadian Mist, and Collingwood brands for $177 in cash. The sale reflects the continued evolution of our portfolio strategy to focus on premium spirits brands. The total book value of the related business assets included in the sale was $50, consisting largely of inventories, the Canadian Mist production assets, and intellectual property. As a result of the sale, we recognized a pre-tax gain of $127 during fiscal 2021.

13. Derivative Financial Instruments and Hedging Activities

We are subject to market risks, including the effect of fluctuations in foreign currency exchange rates, commodity prices, and interest rates. We use derivatives to help manage financial exposures that occur in the normal course of business. We formally document the purpose of each derivative contract, which includes linking the contract to the financial exposure it is designed to mitigate. We do not hold or issue derivatives for trading or speculative purposes.

We use currency derivative contracts to limit our exposure to the foreign currency exchange risk that we cannot mitigate internally by using netting strategies. We designate most of these contracts as cash flow hedges of forecasted transactions (expected to occur within three years). We record all changes in the fair value of cash flow hedges in accumulated other comprehensive income (AOCI) until the underlying hedged transaction occurs, when we reclassify that amount into earnings.

Some of our currency derivatives are not designated as hedges because we use them to partially offset the immediate earnings impact of changes in foreign currency exchange rates on existing assets or liabilities. We immediately recognize the change in fair value of these contracts in earnings.

We had outstanding currency derivatives, related primarily to our euro, British pound, and Australian dollar exposures, with notional amounts for all hedged currencies totaling $801 and $747 at April 30, 2022 and 2023, respectively. The maximum term of outstanding derivative contracts was 36 months and 24 months at April 30, 2022 and 2023, respectively.

We also use foreign currency-denominated debt to help manage our foreign currency exchange risk. We designate a portion of those debt instruments as net investment hedges, which are intended to mitigate foreign currency exposure related to non-U.S.-dollar net investments in certain foreign subsidiaries. Any change in value of the designated portion of the hedging instruments is recorded in AOCI, offsetting the foreign currency translation adjustment of the related net investments that is also recorded in AOCI. The amount of foreign currency-denominated debt designated as net investment hedges was $636 and $495 as of April 30, 2022 and 2023, respectively.

At inception, we expect each financial instrument designated as a hedge to be highly effective in offsetting the financial exposure it is designed to mitigate, and we assess hedge-effectiveness continually. If we determine that an instrument is no longer highly effective, we stop designating and accounting for it as a hedge.

We use forward purchase contracts with suppliers to protect against corn price volatility. We expect to take physical delivery of the corn underlying each contract and use it for production over a reasonable period of time. Accordingly, we account for these contracts as normal purchases rather than as derivative instruments.

In the fourth quarter of fiscal 2023, we entered into $350 of interest rate derivative contracts (U.S. Treasury lock agreements) to manage the interest rate risk related to the anticipated issuance of fixed-rate senior unsecured notes. We designated the contracts as cash flow hedges of the future interest payments associated with the anticipated notes. Upon issuance of the 4.75% senior notes in March 2023 (see Note 6), we settled the contracts for a $1 loss. The loss was recorded to AOCI and will be amortized as an addition to interest expense over the life of the 4.75% senior notes.

The following table presents the pre-tax impact that changes in the fair value of our derivative instruments and non-derivative hedging instruments had on AOCI and earnings during each of the last three years:

			Classification in Statement of Operations						2021						2022						2023
Currency derivatives designated as cash flow hedges:
Net gain (loss) recognized in AOCI			n/a						$	(78)					$	76					$	4
Net gain (loss) reclassified from AOCI into earnings			Sales						21						5						37
Net gain (loss) reclassified from AOCI into earnings			Other income (expense), net						—						2						—
Interest rate derivatives designated as cash flow hedges:
Net gain (loss) recognized in AOCI			n/a						—						—						(1)
Currency derivatives not designated as hedging instruments:
Net gain (loss) recognized in earnings			Sales						(13)						12						(1)
Net gain (loss) recognized in earnings			Other income (expense), net						17						5						16
Foreign currency-denominated debt designated as net investment hedge:
Net gain (loss) recognized in AOCI			n/a						(73)						78						3
Total amounts presented in the accompanying consolidated statements of operations for line items affected by the net gains (losses) shown above:
Sales									4,526						5,081						5,372
Other income (expense), net									15						(59)						(119)

We expect to reclassify $6 of deferred net gains on cash flow hedges recorded in AOCI as of April 30, 2023, to earnings during fiscal 2024. This reclassification would offset the anticipated earnings impact of the underlying hedged exposures. The actual amounts that we ultimately reclassify to earnings will depend on the exchange rates in effect when the underlying hedged transactions occur.

The following table presents the fair values of our derivative instruments as of April 30, 2022 and 2023:

			Balance Sheet Classification						Derivative Assets						Derivative Liabilities
April 30, 2022
Designated as cash flow hedges:
Currency derivatives			Other current assets						$	32					$	(3)
Currency derivatives			Other assets						20						(1)
Not designated as hedges:
Currency derivatives			Accrued expenses						—						(1)
April 30, 2023
Designated as cash flow hedges:
Currency derivatives			Other current assets						20						(11)
Currency derivatives			Other assets						5						(1)
Currency derivatives			Accrued expenses						—						(1)
Currency derivatives			Other liabilities						—						(1)
Not designated as hedges:
Currency derivatives			Other current assets						3						—

The fair values reflected in the above table are presented on a gross basis. However, as discussed further below, the fair values of those instruments subject to net settlement agreements are presented on a net basis in our balance sheets.

In our statements of cash flows, we classify cash flows related to cash flow hedges in the same category as the cash flows from the hedged items.

Credit risk. We are exposed to credit-related losses if the counterparties to our derivative contracts default. This credit risk is limited to the fair value of the contracts. To manage this risk, we contract only with major financial institutions that have earned investment-grade credit ratings and with whom we have standard International Swaps and Derivatives Association (ISDA) agreements that allow for net settlement of the derivative contracts. Also, we have established counterparty credit guidelines that we monitor regularly. Based on our most recent assessment. we consider our counterparty credit risk to be low.

Our derivative instruments require us to maintain a specific level of creditworthiness, which we have maintained. If our creditworthiness were to fall below that level, then the counterparties to our derivative instruments could request immediate payment or collateralization for derivative instruments in net liability positions. The aggregate fair value of all derivatives with creditworthiness requirements that were in a net liability position was $0 and $1 at April 30, 2022 and 2023, respectively.

Offsetting. As noted above, our derivative contracts are governed by ISDA agreements that allow for net settlement of derivative contracts with the same counterparty. It is our policy to present the fair values of current derivatives (that is, those with a remaining term of 12 months or less) with the same counterparty on a net basis in our balance sheets. Similarly, we present the fair values of noncurrent derivatives with the same counterparty on a net basis. We do not net current derivatives with noncurrent derivatives in our balance sheets.

The following table summarizes the gross and net amounts of our derivative contracts:

			Gross Amounts of Recognized Assets (Liabilities)						Gross Amounts Offset in Balance Sheet						Net Amounts Presented in Balance Sheet						Gross Amounts Not Offset in Balance Sheet						Net Amounts
April 30, 2022
Derivative assets			$	52					$	(4)					$	48					$	(1)					$	47
Derivative liabilities			(5)						4						(1)						1						—
April 30, 2023
Derivative assets			28						(12)						16						(1)						15
Derivative liabilities			(14)						12						(2)						1						(1)

No cash collateral was received or pledged related to our derivative contracts as of April 30, 2022 or 2023.

14. Fair Value Measurements

The following table summarizes the assets and liabilities measured or disclosed at fair value on a recurring basis:

			2022												2023
April 30,			Carrying Amount						Fair Value						Carrying Amount						Fair Value
Assets:
Cash and cash equivalents			$	868					$	868					$	374					$	374
Currency derivatives			48						48						16						16
Liabilities:
Currency derivatives			1						1						2						2
Contingent consideration (Note 12)			—						—						56						56
Short-term borrowings			—						—						235						235
Long-term debt (including current portion)			2,269						2,239						2,678						2,556

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. We categorize the fair values of assets and liabilities into three levels based on the assumptions (inputs) used to determine those values. Level 1 provides the most reliable measure of fair value, while Level 3 generally requires significant management judgment. The three levels are:

• Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2 – Observable inputs other than those included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in inactive markets, or other inputs that are observable or can be derived from or corroborated by observable market data.

• Level 3 – Unobservable inputs supported by little or no market activity.

We determine the fair values of our currency derivatives (forward contracts) using standard valuation models. The significant inputs used in these models, which are readily available in public markets or can be derived from observable market transactions, include the applicable spot exchange rates, forward exchange rates, and interest rates. These fair value measurements are categorized as Level 2 within the valuation hierarchy.

We determine the fair value of long-term debt primarily based on the prices at which identical or similar debt has recently traded in the market and also considering the overall market conditions on the date of valuation. These fair value measurements are categorized as Level 2 within the valuation hierarchy.

The fair values of cash, cash equivalents, and short-term borrowings approximate the carrying amounts due to the short maturities of these instruments.

We measure some assets and liabilities at fair value on a nonrecurring basis. That is, we do not measure them at fair value on an ongoing basis, but we do adjust them to fair value in some circumstances (for example, when we determine that an asset is impaired). During fiscal 2022, we recognized non-cash impairment charges of $9 on certain fixed assets. The impairment charges, which were based on our measurements of the estimated fair values of those assets, are categorized as Level 2 within the valuation hierarchy. The remaining carrying amount of those fixed assets is not significant.

As discussed in Note 4, we recognized non-cash impairment charges of $52 and $96 related to the Finlandia brand name during fiscal 2022 and 2023, respectively. The impairment charges were based on the estimated fair value of the brand name, which we determined using the relief-from-royalty method. As discussed in Note 12, we used the relief-from-royalty method and the Monte Carlo simulation model to determine fair values in connection with our accounting for business combinations. The fair value measurements determined using these models are categorized as Level 3 within the valuation hierarchy. No other material nonrecurring fair value measurements were required during the periods presented in these financial statements.

15. Leases

We enter into lease arrangements, which we use primarily for office space, vehicles, and land. Substantially all of our leases are operating leases. Our finance leases are not material.

We record lease liabilities and right-of-use (ROU) assets on our balance sheet for leases with terms exceeding 12 months. We do not record lease liabilities or ROU assets for short-term leases. The amounts recorded for lease liabilities and ROU assets are based on the estimated present value, as of the lease commencement date, of the future payments to be made over the lease term. We calculate the present value using our incremental borrowing rate that corresponds to the term of the lease. We include the effect of an option to renew or terminate a lease in the lease term when it is reasonably certain that we will exercise the option.

Some of our leases contain non-lease components (e.g., maintenance or other services) in addition to lease components. We have elected the practical expedient not to separate the non-lease components from the lease components.

The following table shows information about our leases as of the end of the last two years:

			Balance Sheet Classification			April 30, 2022						April 30, 2023
Right-of-use assets			Other assets			$	74					$	84
Lease liabilities:
Current			Accounts payable and accrued expenses			$	21					$	22
Non-current			Other liabilities			54						63
Total						$	75					$	85
Weighted-average discount rate						1.8%						3.3%
Weighted-average remaining term						5.0 years						5.1 years

The following table shows information about the effects of leases during each of the last three years:

			2021						2022						2023
Total lease cost1			$	41					$	38					$	38
Cash paid for amounts included in the measurement of lease liabilities2			26						25						25
Right-of-use assets obtained in exchange for new lease liabilities			25						35						29

1Consists primarily of operating lease cost. Other components of lease cost were not material.

2Classified within operating activities in the accompanying consolidated statements of cash flows.

The following table includes a maturity analysis of future (undiscounted) lease payments and a reconciliation of those payments to the lease liabilities recorded on our balance sheet as of April 30, 2023:

			April 30, 2023
2024			$	24
2025			19
2026			15
2027			13
2028			9
Thereafter			12
Total lease payments			92
Less: Present value discount			(7)
Lease liabilities			$	85

16. Other Comprehensive Income

The following table presents the components of net other comprehensive income (loss) during each of the last three years:

			Pre-Tax						Tax						Net
Year Ended April 30, 2021
Currency translation adjustments:
Net gain (loss) on currency translation			$	106					$	17					$	123
Reclassification to earnings			—						—						—
Other comprehensive income (loss), net			106						17						123
Cash flow hedge adjustments:
Net gain (loss) on hedging instruments			(78)						17						(61)
Reclassification to earnings1			(21)						6						(15)
Other comprehensive income (loss), net			(99)						23						(76)
Postretirement benefits adjustments:
Net actuarial gain (loss) and prior service cost			71						(16)						55
Reclassification to earnings2			30						(7)						23
Other comprehensive income (loss), net			101						(23)						78
Total other comprehensive income (loss), net			$	108					$	17					$	125
Year Ended April 30, 2022
Currency translation adjustments:
Net gain (loss) on currency translation			$	(42)					$	(18)					$	(60)
Reclassification to earnings			—						—						—
Other comprehensive income (loss), net			(42)						(18)						(60)
Cash flow hedge adjustments:
Net gain (loss) on hedging instruments			76						(17)						59
Reclassification to earnings1			(7)						1						(6)
Other comprehensive income (loss), net			69						(16)						53
Postretirement benefits adjustments:
Net actuarial gain (loss) and prior service cost			67						(16)						51
Reclassification to earnings2			34						(8)						26
Other comprehensive income (loss), net			101						(24)						77
Total other comprehensive income (loss), net			$	128					$	(58)					$	70
Year Ended April 30, 2023
Currency translation adjustments:
Net gain (loss) on currency translation			$	135					$	—					$	135
Reclassification to earnings			—						—						—
Other comprehensive income (loss), net			135						—						135
Cash flow hedge adjustments:
Net gain (loss) on hedging instruments			3						(1)						2
Reclassification to earnings1			(37)						8						(29)
Other comprehensive income (loss), net			(34)						7						(27)
Postretirement benefits adjustments:
Net actuarial gain (loss) and prior service cost			(26)						6						(20)
Reclassification to earnings2			38						(9)						29
Other comprehensive income (loss), net			12						(3)						9
Total other comprehensive income (loss), net			$	113					$	4					$	117

1For 2022, $(2) of the pre-tax amount of $(7) is classified in other income in the accompanying consolidated statements of operations. Otherwise, the pre-tax amount for each year is classified as sales.

2For 2021, $4 of the pre-tax amount of $30 is classified in gain on sale of business in the accompanying consolidated statements of operations. Otherwise, the pre-tax amount for each year is classified as non-operating postretirement expense.

17. Supplemental Information

The following table presents net sales by geography:

			2021						2022						2023
Net sales:
United States			$	1,748					$	1,917					$	1,968
Mexico			150						178						244
Germany			206						228						239
Australia			209						219						221
United Kingdom			205						218						207
Other			943						1,173						1,349
			$	3,461					$	3,933					$	4,228

Net sales are attributed to countries based on where customers are located. See Note 8 for additional information about net sales, including net sales by product category.

Our two largest customers accounted for 19% and 13% of consolidated net sales in 2021; 14% and 12% of consolidated net sales in 2022; and 14% and 12% of consolidated net sales in 2023.

The net book value of property, plant, and equipment located outside the United States was $116 and $204 as of April 30, 2022 and 2023, respectively. Other long-lived assets located outside the United States are not significant.

We have concluded that our business constitutes a single operating segment.