Item 1. Financial Statements

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

			Three Months Ended March 31												Nine Months Ended March 31
Amounts in millions except per share amounts			2022						2021						2022						2021
NET SALES			$	19,381					$	18,109					$	60,672					$	57,172
Cost of products sold			10,326						8,922						31,355						27,317
Selling, general and administrative expense			5,031						5,402						15,102						15,409
OPERATING INCOME			4,024						3,785						14,215						14,446
Interest expense			(109)						(106)						(324)						(385)
Interest income			9						11						30						30
Other non-operating income/(expense), net			147						187						424						(40)
EARNINGS BEFORE INCOME TAXES			4,071						3,877						14,345						14,051
Income taxes			704						628						2,610						2,607
NET EARNINGS			3,367						3,249						11,735						11,444
Less: Net earnings/(loss) attributable to noncontrolling interests			12						(20)						45						44
NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE			$	3,355					$	3,269					$	11,690					$	11,400
NET EARNINGS PER SHARE (1)
Basic			$	1.37					$	1.30					$	4.76					$	4.53
Diluted			$	1.33					$	1.26					$	4.59					$	4.37
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING			2,530.2						2,590.3						2,544.4						2,610.4

(1)Basic net earnings per share and Diluted net earnings per share are calculated on Net earnings attributable to Procter & Gamble.

See accompanying Notes to Consolidated Financial Statements.

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

			Three Months Ended March 31												Nine Months Ended March 31
Amounts in millions			2022						2021						2022						2021
NET EARNINGS			$	3,367					$	3,249					$	11,735					$	11,444
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX
Foreign currency translation			23						(598)						(683)						639
Unrealized gains on investment securities			—						5						7						19
Unrealized gains on defined benefit retirement plans			89						194						968						24
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX			112						(399)						292						682
TOTAL COMPREHENSIVE INCOME			3,479						2,850						12,027						12,126
Less: Total comprehensive income/(loss) attributable to noncontrolling interests			8						(21)						41						50
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO PROCTER & GAMBLE			$	3,471					$	2,871					$	11,986					$	12,076

See accompanying Notes to Consolidated Financial Statements.

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

Amounts in millions															March 31, 2022						June 30, 2021
Assets
CURRENT ASSETS
Cash and cash equivalents															$	8,526					$	10,288
Accounts receivable															5,513						4,725
INVENTORIES
Materials and supplies															2,146						1,645
Work in process															837						719
Finished goods															4,118						3,619
Total inventories															7,101						5,983
Prepaid expenses and other current assets															2,276						2,095
TOTAL CURRENT ASSETS															23,416						23,091
PROPERTY, PLANT AND EQUIPMENT, NET															21,323						21,686
GOODWILL															40,710						40,924
TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET															23,913						23,642
OTHER NONCURRENT ASSETS															10,855						9,964
TOTAL ASSETS															$	120,217					$	119,307
Liabilities and Shareholders' Equity
CURRENT LIABILITIES
Accounts payable															$	14,175					$	13,720
Accrued and other liabilities															10,324						10,523
Debt due within one year															9,902						8,889
TOTAL CURRENT LIABILITIES															34,401						33,132
LONG-TERM DEBT															23,767						23,099
DEFERRED INCOME TAXES															6,543						6,153
OTHER NONCURRENT LIABILITIES															9,760						10,269
TOTAL LIABILITIES															74,471						72,653
SHAREHOLDERS’ EQUITY
Preferred stock															846						870
Common stock – shares issued –			March 2022						4,009.2
			June 2021						4,009.2						4,009						4,009
Additional paid-in capital															65,614						64,848
Reserve for ESOP debt retirement															(916)						(1,006)
Accumulated other comprehensive loss															(13,448)						(13,744)
Treasury stock															(122,272)						(114,973)
Retained earnings															111,645						106,374
Noncontrolling interest															268						276
TOTAL SHAREHOLDERS’ EQUITY															45,746						46,654
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY															$	120,217					$	119,307

See accompanying Notes to Consolidated Financial Statements.

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

			Three Months Ended March 31, 2022
Dollars in millions; shares in thousands			Common Stock						Preferred Stock			Add-itional Paid-In Capital			Reserve for ESOP Debt Retirement			Accumulated Other Comp-rehensive Income/(Loss)			Treasury Stock			Retained Earnings			Non-controlling Interest			Total Share-holders' Equity
Shares			Amount
BALANCE DECEMBER 31, 2021			2,397,066			$4,009			$856			$65,432			($965)			($13,564)			($121,543)			$110,393			$275			$44,893
Net earnings																								3,355			12			3,367
Other comprehensive income/(loss)																		116									(4)			112
Dividends and dividend equivalents ($0.8698 per share):
Common																								(2,092)						(2,092)
Preferred																								(68)						(68)
Treasury stock purchases			(7,909)																		(1,249)									(1,249)
Employee stock plans			9,108									180									512									692
Preferred stock conversions			1,032						(10)			2									8									—
ESOP debt impacts															49									57						106
Noncontrolling interest, net												—															(15)			(15)
BALANCE MARCH 31, 2022			2,399,297			$4,009			$846			$65,614			($916)			($13,448)			($122,272)			$111,645			$268			$45,746

			Nine Months Ended March 31, 2022
Dollars in millions; shares in thousands			Common Stock						Preferred Stock			Add-itional Paid-In Capital			Reserve for ESOP Debt Retirement			Accumulated Other Comp-rehensive Income/(Loss)			Treasury Stock			Retained Earnings			Non-controlling Interest			Total Share-holders' Equity
Shares			Amount
BALANCE JUNE 30, 2021			2,429,706			$4,009			$870			$64,848			($1,006)			($13,744)			($114,973)			$106,374			$276			$46,654
Net earnings																								11,690			45			11,735
Other comprehensive income/(loss)																		296									(4)			292
Dividends and dividend equivalents ($2.6094 per share):
Common																								(6,318)						(6,318)
Preferred																								(208)						(208)
Treasury stock purchases			(58,695)																		(8,753)									(8,753)
Employee stock plans			25,531									764									1,434									2,198
Preferred stock conversions			2,755						(24)			4									20									—
ESOP debt impacts															90									107						197
Noncontrolling interest, net												(2)															(49)			(51)
BALANCE MARCH 31, 2022			2,399,297			$4,009			$846			$65,614			($916)			($13,448)			($122,272)			$111,645			$268			$45,746

See accompanying Notes to Consolidated Financial Statements.

			Three Months Ended March 31, 2021
Dollars in millions; shares in thousands			Common Stock						Preferred Stock			Add-itional Paid-In Capital			Reserve for ESOP Debt Retirement			Accumulated Other Comp-rehensive Income/(Loss)			Treasury Stock			Retained Earnings			Non-controlling Interest			Total Share-holders' Equity
Shares			Amount
BALANCE DECEMBER 31, 2020			2,462,476			$4,009			$885			$64,672			($1,072)			($15,091)			($109,583)			$104,361			$359			$48,540
Net earnings																								3,269			(20)			3,249
Other comprehensive income/(loss)																		(398)									(1)			(399)
Dividends and dividend equivalents ($0.7907 per share):
Common																								(1,952)						(1,952)
Preferred																								(65)						(65)
Treasury stock purchases			(23,085)																		(3,001)									(3,001)
Employee stock plans			7,605									8									427									435
Preferred stock conversions			1,237						(12)			2									10									—
ESOP debt impacts															66									61						127
Noncontrolling interest, net																											(15)			(15)
BALANCE MARCH 31, 2021			2,448,233			$4,009			$873			$64,682			($1,006)			($15,489)			($112,147)			$105,674			$323			$46,919

			Nine Months Ended March 31, 2021
Dollars in millions; shares in thousands			Common Stock						Preferred Stock			Add-itional Paid-In Capital			Reserve for ESOP Debt Retirement			Accumulated Other Comp-rehensive Income/(Loss)			Treasury Stock			Retained Earnings			Non-controlling Interest			Total Share-holders' Equity
Shares			Amount
BALANCE JUNE 30, 2020			2,479,746			$4,009			$897			$64,194			($1,080)			($16,165)			($105,573)			$100,239			$357			$46,878
Net earnings																								11,400			44			11,444
Other comprehensive income/(loss)																		676									6			682
Dividends and dividend equivalents ( $2.3721 per share):
Common																								(5,887)						(5,887)
Preferred																								(197)						(197)
Treasury stock purchases			(59,212)																		(8,009)									(8,009)
Employee stock plans			24,945									484									1,415									1,899
Preferred stock conversions			2,754						(24)			4									20									—
ESOP debt impacts															74									119						193
Noncontrolling interest, net																											(84)			(84)
BALANCE MARCH 31, 2021			2,448,233			$4,009			$873			$64,682			($1,006)			($15,489)			($112,147)			$105,674			$323			$46,919

See accompanying Notes to Consolidated Financial Statements.

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

			Nine Months Ended March 31
Amounts in millions			2022						2021
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD			$	10,288					$	16,181
OPERATING ACTIVITIES
Net earnings			11,735						11,444
Depreciation and amortization			2,085						2,025
Loss on early extinguishment of debt			—						512
Share-based compensation expense			398						398
Deferred income taxes			(259)						(167)
Gain on sale of assets			(84)						(15)
Changes in:
Accounts receivable			(916)						(604)
Inventories			(1,252)						(399)
Accounts payable, accrued and other liabilities			1,347						1,049
Other operating assets and liabilities			(131)						(92)
Other			87						99
TOTAL OPERATING ACTIVITIES			13,010						14,250
INVESTING ACTIVITIES
Capital expenditures			(2,464)						(2,073)
Proceeds from asset sales			99						40
Acquisitions, net of cash acquired			(1,381)						—
Change in other investments			4						(10)
TOTAL INVESTING ACTIVITIES			(3,742)						(2,043)
FINANCING ACTIVITIES
Dividends to shareholders			(6,508)						(6,066)
Additions to short-term debt with original maturities of more than three months			10,146						6,238
Reductions in short-term debt with original maturities of more than three months			(8,163)						(3,805)
Reductions in other short-term debt			(849)						(5,814)
Additions to long-term debt			4,385						2,429
Reductions to long-term debt (1)			(2,776)						(4,889)
Treasury stock purchases			(8,753)						(8,009)
Impact of stock options and other			1,800						1,470
TOTAL FINANCING ACTIVITIES			(10,718)						(18,446)
EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH			(312)						65
CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH			(1,762)						(6,174)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD			$	8,526					$	10,007

(1) Includes early extinguishment of debt costs of $512 during the nine months ended March 31, 2021.

See accompanying Notes to Consolidated Financial Statements.

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

These statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021. In the opinion of management, the accompanying unaudited Consolidated Financial Statements of The Procter & Gamble Company and subsidiaries (the "Company," "Procter & Gamble," "P&G," "we" or "our") contain all adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods reported. However, the results of operations included in such financial statements may not necessarily be indicative of annual results.

Beginning in fiscal year 2022, the Company began to present increases and reductions in short-term debt with maturities of more than three months separately within the Consolidated Statements of Cash Flows. The presentation for the nine months ended March 31, 2021 has been revised to align with the current period presentation. This change had no impact on total financing activities, and we have concluded the change is not material.

2. New Accounting Pronouncements and Policies

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting". The amendments provide optional expedients and exceptions for applying generally accepted accounting principles ("GAAP") to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. In January 2021, the FASB issued ASU No. 2021-01, "Reference Rate Reform (Topic 848): Scope", which clarified that certain optional expedients and exceptions in Topic 848 apply to derivative instruments that are affected by the discounting transition due to reference rate reform. These ASUs were effective upon issuance and may be applied prospectively to contract modifications and hedging relationships entered into or evaluated through December 31, 2022. We have completed our evaluation of significant contracts. Most contracts reviewed will mature prior to the termination of LIBOR or will be modified to apply a new reference rate, primarily the Secured Overnight Financing Rate ("SOFR") where applicable. As a result, the guidance has not had, and is not expected to have, a material impact on the Company's Consolidated Financial Statements.

In November 2021, the FASB issued ASU 2021-10, "Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance". This guidance requires annual disclosures for transactions with a government authority that are accounted for by applying a grant or contribution model. These amendments are effective for annual periods beginning after December 15, 2021, with early adoption permitted. We plan to adopt the standard for the fiscal year ending June 30, 2023. We are currently assessing the impact of this guidance on our Consolidated Financial Statements and disclosures.

No other new accounting pronouncement issued or effective during the fiscal year had, or is expected to have, a material impact on our Consolidated Financial Statements.

3. Segment Information

Under U.S. GAAP, our operating segments are aggregated into five reportable segments: 1) Beauty, 2) Grooming, 3) Health Care, 4) Fabric & Home Care and 5) Baby, Feminine & Family Care. Our five reportable segments are comprised of:

• Beauty: Hair Care (Conditioners, Shampoos, Styling Aids, Treatments); Skin and Personal Care (Antiperspirants and Deodorants, Personal Cleansing, Skin Care);

• Grooming: Shave Care (Female Blades & Razors, Male Blades & Razors, Pre- and Post-Shave Products, Other Shave Care); Appliances;

• Health Care: Oral Care (Toothbrushes, Toothpaste, Other Oral Care); Personal Health Care (Gastrointestinal, Rapid Diagnostics, Respiratory, Vitamins/Minerals/Supplements, Pain Relief, Other Personal Health Care);

• Fabric & Home Care: Fabric Care (Fabric Enhancers, Laundry Additives, Laundry Detergents); Home Care (Air Care, Dish Care, P&G Professional, Surface Care); and

• Baby, Feminine & Family Care: Baby Care (Baby Wipes, Taped Diapers and Pants); Feminine Care (Adult Incontinence, Feminine Care); Family Care (Paper Towels, Tissues, Toilet Paper).

Amounts in millions of dollars unless otherwise specified.

Our operating segments are comprised of similar product categories. Operating segments that individually accounted for 5% or more of consolidated net sales are as follows:

			% of Net sales by operating segment (1)
			Three Months Ended March 31												Nine Months Ended March 31
			2022						2021						2022						2021
Fabric Care			23%						23%						23%						22%
Home Care			12%						12%						11%						12%
Baby Care			11%						11%						10%						10%
Skin and Personal Care			9%						9%						10%						10%
Family Care			9%						9%						9%						9%
Hair Care			8%						9%						9%						9%
Oral Care			8%						8%						8%						8%
Shave Care			7%						7%						6%						7%
Feminine Care			6%						6%						6%						6%
Personal Health Care			6%						5%						6%						5%
Other			1%						1%						2%						2%
Total			100%						100%						100%						100%

(1)% of Net sales by operating segment excludes sales held in Corporate.

The following is a summary of reportable segment results:

						Three Months Ended March 31																		Nine Months Ended March 31
						Net Sales						Earnings/(Loss) Before Income Taxes						Net Earnings						Net Sales						Earnings/(Loss) Before Income Taxes						Net Earnings
Beauty			2022			$	3,389					$	792					$	644					$	11,279					$	3,213					$	2,582
			2021			3,316						721						577						10,907						3,145						2,508
Grooming			2022			1,481						353						290						4,979						1,447						1,183
			2021			1,438						314						256						4,774						1,277						1,063
Health Care			2022			2,662						625						485						8,314						2,225						1,715
			2021			2,356						484						377						7,573						1,993						1,557
Fabric & Home Care			2022			6,699						1,275						969						20,680						4,284						3,297
			2021			6,275						1,348						1,027						19,417						4,689						3,626
Baby, Feminine & Family Care			2022			4,935						1,091						836						14,915						3,353						2,576
			2021			4,604						1,133						871						14,185						3,803						2,924
Corporate			2022			215						(65)						143						505						(177)						382
			2021			120						(123)						141						316						(856)						(234)
Total Company			2022			$	19,381					$	4,071					$	3,367					$	60,672					$	14,345					$	11,735
			2021			18,109						3,877						3,249						57,172						14,051						11,444

Amounts in millions of dollars unless otherwise specified.

4. Goodwill and Other Intangible Assets

Goodwill is allocated by reportable segment as follows:

			Beauty						Grooming						Health Care						Fabric & Home Care						Baby, Feminine & Family Care						Total Company
Goodwill at June 30, 2021			$	13,257					$	13,095					$	8,046					$	1,873					$	4,653					$	40,924
Acquisitions and divestitures			770						—						1						—						—						771
Translation and other			(368)						(257)						(216)						(32)						(112)						(985)
Goodwill at March 31, 2022			$	13,659					$	12,838					$	7,831					$	1,841					$	4,541					$	40,710

Goodwill decreased from June 30, 2021 due to currency translation, partially offset by three acquisitions (Farmacy Beauty, Ouai and TULA) in the Beauty reportable segment.

Identifiable intangible assets at March 31, 2022 were comprised of:

			Gross Carrying Amount						Accumulated Amortization
Intangible assets with determinable lives			$	9,147					$	(6,262)
Intangible assets with indefinite lives			21,028						—
Total identifiable intangible assets			$	30,175					$	(6,262)

Intangible assets with determinable lives consist of brands, patents, technology and customer relationships. The intangible assets with indefinite lives primarily consist of brands. The amortization expense of determinable-lived intangible assets for the three months ended March 31, 2022 and 2021 was $79 and $78, respectively. For the nine months ended March 31, 2022 and 2021, the amortization expense was $230 and $241, respectively.

Goodwill and indefinite-lived intangible assets are not amortized but are tested at least annually for impairment by comparing the estimated fair values of our reporting units and underlying indefinite-lived intangible assets to their respective carrying values. We typically use an income method to estimate the fair value of these assets, which is based on forecasts of the expected future cash flows attributable to the respective assets. If the resulting fair value is less than the asset's carrying value, that difference represents an impairment. Our annual impairment testing for goodwill and indefinite-lived intangible assets occurs during the three months ended December 31.

The business unit valuations used to test goodwill and intangible assets for impairment depend on a number of significant estimates and assumptions, including macroeconomic conditions, overall category growth rates, competitive activities, cost containment, margin expansion and Company business plans. We believe these estimates and assumptions are reasonable. However, future changes in the judgments, assumptions and estimates that are used in our impairment testing for goodwill and indefinite-lived intangible assets, including discount rates, tax rates or future cash flow projections, could result in significantly different estimates of the fair values. To the extent changes in such factors result in a failure to achieve the level of projected cash flows initially used to estimate fair value for purposes of establishing or subsequently impairing the carrying amount of goodwill and related intangible assets, we may need to record non-cash impairment charges in the future.

Most of our goodwill reporting units are comprised of a combination of legacy and acquired businesses and as a result have fair value cushions that, at a minimum, exceed three times their underlying carrying values. Certain of our reporting units, in particular Shave Care and Appliances, are comprised entirely of acquired businesses and as a result, have historically had fair value cushions that are not as high. The Appliances reporting unit has a fair value that significantly exceeds the underlying carrying value. As previously disclosed, the carrying values of the Shave Care reporting unit and the related Gillette indefinite-lived intangible asset were impaired during the quarter ended June 30, 2019. Based on our impairment testing during the three months ended December 31, 2021, the Shave Care reporting unit fair value exceeded its carrying value by more than 30% and the Gillette indefinite-lived intangible asset fair value exceeded its carrying value by approximately 5%.

The most significant assumptions utilized in the determination of the estimated fair values of the Shave Care reporting unit and the Gillette indefinite-lived intangible asset are the net sales and earnings growth rates (including residual growth rates), the discount rate and the royalty rate. The residual growth rates represent the expected rate at which the Shave Care reporting unit and Gillette brand are expected to grow beyond the shorter-term business planning period. The residual growth rate utilized in our fair value estimates is consistent with the reporting unit and brand operating plans and approximates expected long-term category market growth rates. The residual growth rate depends on overall market growth rates, the competitive environment, inflation, relative currency exchange rates and business activities that impact market share. As a result, the residual growth rate could be adversely impacted by a sustained deceleration in category growth, grooming habit changes, devaluation of currencies against the U.S. dollar or an increased competitive environment. The discount rate, which is consistent with a weighted average

Amounts in millions of dollars unless otherwise specified.

cost of capital that is likely to be expected by a market participant, is based upon industry required rates of return, including consideration of both debt and equity components of the capital structure. Our discount rate may be impacted by adverse changes in the macroeconomic environment, volatility in the equity and debt markets or other country specific factors, such as further devaluation of currencies against the U.S. dollar. Spot rates as of the fair value measurement date are utilized in our fair value estimates for cash flows outside the U.S. The royalty rate used to determine the estimated fair value for the Gillette indefinite-lived intangible asset is driven by historical and estimated future profitability of the underlying Gillette business. The royalty rate may be impacted by significant adverse changes in long-term operating margins.

While management has implemented strategies to address these events, changes in operating plans or adverse changes in the business or in the macroeconomic environment in the future could reduce the underlying cash flows used to estimate fair values and could result in a decline in fair value that would trigger future impairment charges of the Shave Care reporting unit's goodwill and Gillette indefinite-lived intangible asset. The duration and severity of the pandemic could also result in future impairment charges for the Shave Care reporting unit goodwill and the Gillette indefinite-lived intangible asset. While we have concluded that no triggering event has occurred during the quarter ended March 31, 2022, the Gillette indefinite-lived intangible asset is most susceptible to future impairment risk. Our assessment of the Gillette indefinite-lived intangible asset assumes the net sales growth rates will continue to recover from the impact of the COVID-19 pandemic during the current fiscal year. There continues to be a high level of uncertainty relating to how the pandemic will evolve, how governments and consumers will react, progress on the distribution of vaccines and whether the pandemic will have a longer-term effect on consumer habits. Accordingly, there continues to be risk related to this key assumption. A more prolonged pandemic recovery period could impact the assumptions utilized in the determination of the estimated fair values of the Shave Care reporting unit and the Gillette indefinite-lived intangible asset that are significant enough to trigger an impairment. Net sales and earnings growth rates could be negatively impacted by reductions or changes in demand for our Shave Care products, which may be caused by, among other things: the Russia-Ukraine War, the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions, or financial hardship, changes in the use and frequency of grooming products, by shifts in demand away from one or more of our higher priced products to lower priced products or by impacts of potential supply chain constraints. In addition, relative global and country/regional macroeconomic factors, including the Russia-Ukraine War, could result in additional and prolonged devaluation of other countries’ currencies relative to the U.S. dollar. Finally, the discount rate utilized in our valuation model could be impacted by changes in the underlying interest rates and risk premiums included in the determination of the cost of capital. As of March 31, 2022, the carrying values of the Shave Care goodwill and the Gillette indefinite-lived intangible asset were $12.5 billion and $14.1 billion, respectively.

We performed a sensitivity analysis for the Shave Care reporting unit and the Gillette indefinite-lived intangible asset as part of our annual impairment testing, utilizing reasonably possible changes in the assumptions for the shorter-term and residual growth rates, discount rate and royalty rate to demonstrate the potential impacts to estimated fair values. The table below provides, in isolation, the estimated fair value impacts related to a 25 basis-point increase in the discount rate, a 25 basis-point decrease in our shorter-term and residual revenue growth rates or a 50 basis-point decrease in our royalty rate, some of which would result in an impairment of the Gillette indefinite-lived intangible asset.

			Approximate Percent Change in Estimated Fair Value
			+25 bps Discount Rate						-25 bps Growth Rates						-50 bps Royalty Rate
Shave Care goodwill reporting unit			(6)%						(6)%						N/A
Gillette indefinite-lived intangible asset			(6)%						(6)%						(3)%

In light of the Russia-Ukraine War, we performed an additional sensitivity analysis for the Shave Care reporting unit and the Gillette indefinite-lived intangible asset for a range of outcomes, including reduced future cash flows and no future cash flows in Ukraine and Russia. Under these scenarios, the Shave Care reporting unit fair value continued to exceed its carrying value by approximately 30% and the Gillette indefinite-lived intangible asset’s fair value exceeded or approximated its carrying value. However, if the impact of the war were to extend beyond its current scope, there could be a triggering event for the Gillette indefinite-lived intangible asset that may cause us to perform an additional impairment assessment for that asset in a future period that may result in an impairment charge.

Amounts in millions of dollars unless otherwise specified.

5. Earnings Per Share

Basic net earnings per common share are calculated by dividing Net earnings attributable to Procter & Gamble less preferred dividends by the weighted average number of common shares outstanding during the period. Diluted net earnings per common share are calculated by dividing Net earnings attributable to Procter & Gamble by the diluted weighted average number of common shares outstanding during the period. The diluted shares include the dilutive effect of stock options and other stock-based awards based on the treasury stock method and the assumed conversion of preferred stock.

Net earnings per share were calculated as follows:

CONSOLIDATED AMOUNTS			Three Months Ended March 31												Nine Months Ended March 31
			2022						2021						2022						2021
Net earnings			$	3,367					$	3,249					$	11,735					$	11,444
Less: Net earnings/(loss) attributable to noncontrolling interests			12						(20)						45						44
Net earnings attributable to P&G (Diluted)			3,355						3,269						11,690						11,400
Less: Preferred dividends			68						65						208						197
Net earnings attributable to P&G available to common shareholders (Basic)			$	3,287					$	3,204					$	11,482					$	11,203
SHARES IN MILLIONS
Basic weighted average common shares outstanding			2,400.5						2,459.1						2,414.0						2,473.7
Add: Effect of dilutive securities
Convertible preferred shares (1)			78.9						82.3						79.7						83.1
Stock options and other unvested equity awards (2)			50.8						48.9						50.7						53.6
Diluted weighted average common shares outstanding			2,530.2						2,590.3						2,544.4						2,610.4
NET EARNINGS PER SHARE (3)
Basic			$	1.37					$	1.30					$	4.76					$	4.53
Diluted			$	1.33					$	1.26					$	4.59					$	4.37

(1)An overview of preferred shares can be found in our Annual Report on Form 10-K for the year ended June 30, 2021.

(2)Excludes 5 million and 12 million for the three months ended March 31, 2022 and 2021, respectively, and 11 million and 8 million for the nine months ended March 31, 2022 and 2021, respectively, of weighted average stock options outstanding because the exercise price of these options was greater than their average market value or their effect was antidilutive.

(3)Net earnings per share are calculated on Net earnings attributable to Procter & Gamble.

6. Share-Based Compensation and Postretirement Benefits

The following table provides a summary of our share-based compensation expense and postretirement benefit costs:

			Three Months Ended March 31												Nine Months Ended March 31
			2022						2021						2022						2021
Share-based compensation expense			$	130					$	144					$	398					$	398
Net periodic benefit cost for pension benefits			47						48						143						141
Net periodic benefit credit for other retiree benefits			(126)						(80)						(348)						(240)

Amounts in millions of dollars unless otherwise specified.

7. Risk Management Activities and Fair Value Measurements

As a multinational company with diverse product offerings, we are exposed to market risks, such as changes in interest rates, currency exchange rates and commodity prices. There have been no significant changes in our risk management policies or activities during the nine months ended March 31, 2022.

The Company has not changed its valuation techniques used in measuring the fair value of any financial assets and liabilities during the period. The Company recognizes transfers between levels within the fair value hierarchy, if any, at the end of each quarter. There were no transfers between levels during the periods presented. Also, there was no significant activity within the Level 3 assets and liabilities during the periods presented. There were no significant assets or liabilities that were remeasured at fair value on a non-recurring basis for the nine months ended March 31, 2022.

Cash equivalents were $7.0 billion and $9.1 billion as of March 31, 2022 and June 30, 2021, respectively, and are classified as Level 1 within the fair value hierarchy. Other investments had a fair value of $153 and $192 as of March 31, 2022 and June 30, 2021, respectively, including equity securities of $126 and $163 as of March 31, 2022 and June 30, 2021, respectively, and are presented in Other noncurrent assets. Investments are measured at fair value and primarily classified as Level 1 and Level 2 within the fair value hierarchy. Level 1 are based on quoted market prices in active markets for identical assets, and Level 2 are based on quoted market prices for similar instruments. There are no material investment balances classified as Level 3 within the fair value hierarchy or using net asset value as a practical expedient. Unrealized losses on equity securities were $(4) during the three months ended March 31, 2022. Unrealized gains on equity securities were $58 during the three months ended March 31, 2021. Unrealized losses on equity securities were $(36) during the nine months ended March 31, 2022. Unrealized gains on equity securities were $58 during the nine months ended March 31, 2021. These unrealized gains/(losses) are recognized in the Consolidated Statements of Earnings in Other non-operating income/(expense), net.

The fair value of long-term debt was $27.8 billion and $28.8 billion as of March 31, 2022 and June 30, 2021, respectively. This includes the current portion of long-term debt instruments ($3.6 billion as of March 31, 2022 and June 30, 2021). Certain long-term debt (debt designated as a fair value hedge) is recorded at fair value. All other long-term debt is recorded at amortized cost but is measured at fair value for disclosure purposes. We consider our debt to be Level 2 in the fair value hierarchy. Fair values are generally estimated based on quoted market prices for identical or similar instruments.

Disclosures about Financial Instruments

The notional amounts and fair values of financial instruments used in hedging transactions as of March 31, 2022 and June 30, 2021 are as follows:

			Notional Amount												Fair Value Asset												Fair Value (Liability)
			March 31, 2022						June 30, 2021						March 31, 2022						June 30, 2021						March 31, 2022						June 30, 2021
DERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPS
Interest rate contracts			$	5,241					$	7,415					$	15					$	146					$	(182)					$	—
DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS
Foreign currency interest rate contracts			$	8,428					$	8,484					$	359					$	89					$	(10)					$	(94)
TOTAL DERIVATIVES DESIGNATED AS HEDGING INSTRUMENTS			$	13,669					$	15,899					$	374					$	235					$	(192)					$	(94)
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
Foreign currency contracts			$	6,916					$	5,060					$	31					$	20					$	(26)					$	(22)
TOTAL DERIVATIVES AT FAIR VALUE			$	20,585					$	20,959					$	405					$	255					$	(218)					$	(116)

The fair value of the interest rate derivative asset/(liability) directly offsets the cumulative amount of the fair value hedging adjustment included in the carrying amount of the underlying debt obligation. The carrying amount of the underlying debt obligation, which includes the unamortized discount or premium and the fair value adjustment, was $5.1 billion and $7.5 billion as of March 31, 2022 and June 30, 2021, respectively. In addition to the foreign currency derivative contracts designated as net investment hedges, certain of our foreign currency denominated debt instruments are designated as net investment hedges. The carrying value of those debt instruments designated as net investment hedges, which includes the adjustment for the foreign currency transaction gain or loss on those instruments, was $12.2 billion and $12.0 billion as of March 31, 2022 and June 30, 2021, respectively. The decrease in the notional balance of interest rate contracts was primarily due to the maturity of interest rate swaps that were associated with multiple bonds maturing in the period. The increase in the notional balance of foreign currency contracts not designated as hedging instruments primarily reflects changes in the level of intercompany financing activity during the period.

Amounts in millions of dollars unless otherwise specified.

All derivative assets are presented in Prepaid expenses and other current assets or Other noncurrent assets. All derivative liabilities are presented in Accrued and other liabilities or Other noncurrent liabilities. Changes in the fair value of net investment hedges are recognized in the Foreign currency translation component of Other comprehensive income (OCI). All of the Company's derivative assets and liabilities measured at fair value are classified as Level 2 within the fair value hierarchy.

Before tax gains/(losses) on our financial instruments in hedging relationships are categorized as follows:

			Amount of Gain/(Loss) Recognized in OCI on Derivatives
			Three Months Ended March 31												Nine Months Ended March 31
			2022						2021						2022						2021
DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS (1) (2)
Foreign exchange contracts			$	104					$	393					$	530					$	(145)

(1)For the derivatives in net investment hedging relationships, the amount of gain excluded from effectiveness testing, which was recognized in earnings, was $18 and $15 for the three months ended March 31, 2022 and 2021, respectively. The amount of gain excluded from effectiveness testing was $50 and $45 for the nine months ended March 31, 2022 and 2021, respectively.

(2)In addition to the foreign currency derivative contracts designated as net investment hedges, certain of our foreign currency denominated debt instruments are designated as net investment hedges. The amount of gain recognized in Accumulated other comprehensive income (AOCI) for such instruments was $237 and $509 for the three months ended March 31, 2022 and 2021, respectively. The amount of gain/(loss) recognized in AOCI for such instruments was $804 and $(732) for the nine months ended March 31, 2022 and 2021, respectively.

			Amount of Gain/(Loss) Recognized in Earnings
			Three Months Ended March 31												Nine Months Ended March 31
			2022						2021						2022						2021
DERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPS
Interest rate contracts			$	(216)					$	(100)					$	(313)					$	(95)
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
Foreign currency contracts			$	(2)					$	(87)					$	28					$	221

The gain/(loss) on the derivatives in fair value hedging relationships is fully offset by the mark-to-market impact of the related exposure. These are both recognized in the Consolidated Statements of Earnings in Interest expense. The gain/(loss) on derivatives not designated as hedging instruments is substantially offset by the currency mark-to-market of the related exposure. These are both recognized in the Consolidated Statements of Earnings in Selling, general and administrative expense (SG&A).

Amounts in millions of dollars unless otherwise specified.

8. Accumulated Other Comprehensive Income/(Loss)

The table below presents the changes in Accumulated other comprehensive income/(loss) attributable to Procter & Gamble (AOCI), including the reclassifications out of AOCI by component:

			Investment Securities						Post-retirement Benefits						Foreign Currency Translation						Total AOCI
Balance at June 30, 2021			$	15					$	(2,963)					$	(10,796)					$	(13,744)
OCI before reclassifications (1)			6						812						(683)						135
Amounts reclassified from AOCI into the Consolidated Statements of Earnings (2)			1						156												157
Net current period OCI			7						968						(683)						292
Less: Other comprehensive income/(loss) attributable to non-controlling interests			—						—						(4)						(4)
Balance at March 31, 2022			$	22					$	(1,995)					$	(11,475)					$	(13,448)

(1)Net of tax expense of $1, $257 and $314 for gains/losses on investment securities, postretirement benefit items and foreign currency translation, respectively. Income tax effects within foreign currency translation include impacts from items such as net investment hedge transactions. Foreign cumulative translation is not adjusted for income taxes related to permanent investments in international subsidiaries.

(2)Net of tax expense of $0, $55 and $0 for gains/losses on investment securities, postretirement benefit items and foreign currency translation, respectively.

The below provides additional details on amounts reclassified from AOCI into the Consolidated Statements of Earnings:

• Investment securities: amounts reclassified from AOCI into Other non-operating income, net.

• Postretirement benefits: amounts reclassified from AOCI into Other non-operating income, net and included in the computation of net periodic postretirement costs.

9. Commitments and Contingencies

Litigation

We are subject, from time to time, to certain legal proceedings and claims arising out of our business, which cover a wide range of matters, including antitrust and trade regulation, product liability, advertising, contracts, environmental, patent and trademark matters, labor and employment matters and tax. While considerable uncertainty exists, in the opinion of management and our counsel, the ultimate resolution of the various lawsuits and claims will not materially affect our financial position, results of operations or cash flows.

We are also subject to contingencies pursuant to environmental laws and regulations that in the future may require us to take action to correct the effects on the environment of prior manufacturing and waste disposal practices. Based on currently available information, we do not believe the ultimate resolution of environmental remediation will materially affect our financial position, results of operations or cash flows.

Income Tax Uncertainties

The Company is present in approximately 70 countries and over 150 taxable jurisdictions and, at any point in time, has 40–50 jurisdictional audits underway at various stages of completion. We evaluate our tax positions and establish liabilities for uncertain tax positions that may be challenged by local authorities and may not be fully sustained, despite our belief that the underlying tax positions are fully supportable. Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, developments in case law and closing of statutes of limitations. Such adjustments are reflected in the tax provision as appropriate. We have tax years open ranging from 2010 and forward. We are generally not able to reliably estimate the ultimate settlement amounts until the close of an audit. Based on information currently available, we anticipate that over the next 12 month period, audit activity could be completed related to uncertain tax positions in multiple jurisdictions for which we have accrued existing liabilities of less than $10, including interest and penalties.

Additional information on the Commitments and Contingencies of the Company can be found in our Annual Report on Form 10-K for the year ended June 30, 2021.

Amounts in millions of dollars unless otherwise specified.