Item 1. Financial Statements

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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	2023		2022		2023		2022
NET SALES	$	20,068	$	19,381	$	61,453	$	60,672
Cost of products sold	10,404		10,326		32,147		31,355
Selling, general and administrative expense	5,416		5,031		15,334		15,102
OPERATING INCOME	4,248		4,024		13,972		14,215
Interest expense	(222)		(109)		(516)		(324)
Interest income	83		9		191		30
Other non-operating income, net	179		147		473		424
EARNINGS BEFORE INCOME TAXES	4,288		4,071		14,120		14,345
Income taxes	864		704		2,774		2,610
NET EARNINGS	3,424		3,367		11,346		11,735
Less: Net earnings attributable to noncontrolling interests	27		12		77		45
NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE	$	3,397	$	3,355	$	11,269	$	11,690

NET EARNINGS PER SHARE (1)
Basic	$	1.41	$	1.37	$	4.67	$	4.76
Diluted	$	1.37	$	1.33	$	4.53	$	4.59

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING	2,473.2		2,530.2		2,486.0		2,544.4

(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	2023		2022		2023		2022
NET EARNINGS	$	3,424	$	3,367	$	11,346	$	11,735
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX
Foreign currency translation	259		23		(74)		(683)
Unrealized gains/(losses) on investment securities	1		—		(2)		7
Unrealized gains/(losses) on defined benefit retirement plans	(19)		89		(8)		968
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX	241		112		(84)		292
TOTAL COMPREHENSIVE INCOME	3,665		3,479		11,262		12,027
Less: Total comprehensive income attributable to noncontrolling interests	28		8		70		41
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO PROCTER & GAMBLE	$	3,637	$	3,471	$	11,192	$	11,986

See accompanying Notes to Consolidated Financial Statements.

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


Amounts in millions			March 31, 2023		June 30, 2022
Assets
CURRENT ASSETS
Cash and cash equivalents			$	7,596	$	7,214
Accounts receivable			5,471		5,143
INVENTORIES
Materials and supplies			2,010		2,168
Work in process			966		856
Finished goods			4,507		3,900
Total inventories			7,483		6,924
Prepaid expenses and other current assets			1,755		2,372
TOTAL CURRENT ASSETS			22,305		21,653
PROPERTY, PLANT AND EQUIPMENT, NET			21,564		21,195
GOODWILL			40,718		39,700
TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET			23,832		23,679
OTHER NONCURRENT ASSETS			11,432		10,981
TOTAL ASSETS			$	119,851	$	117,208

Liabilities and Shareholders' Equity
CURRENT LIABILITIES
Accounts payable			$	13,790	$	14,882
Accrued and other liabilities			10,523		9,554
Debt due within one year			13,717		8,645
TOTAL CURRENT LIABILITIES			38,030		33,081
LONG-TERM DEBT			22,874		22,848
DEFERRED INCOME TAXES			6,422		6,809
OTHER NONCURRENT LIABILITIES			7,104		7,616
TOTAL LIABILITIES			74,430		70,354
SHAREHOLDERS’ EQUITY
Preferred stock			822		843
Common stock – shares issued –	March 2023	4,009.2
	June 2022	4,009.2	4,009		4,009
Additional paid-in capital			66,316		65,795
Reserve for ESOP debt retirement			(821)		(916)
Accumulated other comprehensive loss			(12,266)		(12,189)
Treasury stock			(130,002)		(123,382)
Retained earnings			117,082		112,429
Noncontrolling interest			281		265
TOTAL SHAREHOLDERS’ EQUITY			45,421		46,854
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY			$	119,851	$	117,208

See accompanying Notes to Consolidated Financial Statements.

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY


	Three Months Ended March 31, 2023
Dollars in millions; shares in thousands	Common Stock		Preferred Stock	Additional Paid-In Capital	Reserve for ESOP Debt Retirement	Accumulated Other Comprehensive Income/(Loss)	Treasury Stock	Retained Earnings	Noncontrolling Interest	Total Shareholders' Equity
Shares	Amount
BALANCE DECEMBER 31, 2022	2,359,144	$4,009	$831	$66,145	($870)	($12,506)	($129,012)	$115,858	$270	$44,725
Net earnings								3,397	27	3,424
Other comprehensive income/(loss)						240			1	241
Dividends and dividend equivalents ($0.9133 per share):
Common								(2,160)		(2,160)
Preferred								(69)		(69)
Treasury stock purchases	(9,406)						(1,351)			(1,351)
Employee stock plans	6,290			170			353			523
Preferred stock conversions	941		(9)	1			8			—
ESOP debt impacts					49			56		105
Noncontrolling interest, net				—					(17)	(17)
BALANCE MARCH 31, 2023	2,356,969	$4,009	$822	$66,316	($821)	($12,266)	($130,002)	$117,082	$281	$45,421


	Nine Months Ended March 31, 2023
Dollars in millions; shares in thousands	Common Stock		Preferred Stock	Additional Paid-In Capital	Reserve for ESOP Debt Retirement	Accumulated Other Comprehensive Income/(Loss)	Treasury Stock	Retained Earnings	Noncontrolling Interest	Total Shareholders' Equity
Shares	Amount
BALANCE JUNE 30, 2022	2,393,877	$4,009	$843	$65,795	($916)	($12,189)	($123,382)	$112,429	$265	$46,854
Net earnings								11,269	77	11,346
Other comprehensive income/(loss)						(77)			(7)	(84)
Dividends and dividend equivalents ($2.7399 per share):
Common								(6,517)		(6,517)
Preferred								(210)		(210)
Treasury stock purchases	(52,021)						(7,353)			(7,353)
Employee stock plans	12,742			518			715			1,233
Preferred stock conversions	2,371		(21)	3			18			—
ESOP debt impacts					95			111		206
Noncontrolling interest, net				—					(54)	(54)
BALANCE MARCH 31, 2023	2,356,969	$4,009	$822	$66,316	($821)	($12,266)	($130,002)	$117,082	$281	$45,421

See accompanying Notes to Consolidated Financial Statements.


	Three Months Ended March 31, 2022
Dollars in millions; shares in thousands	Common Stock		Preferred Stock	Additional Paid-In Capital	Reserve for ESOP Debt Retirement	Accumulated Other Comprehensive Income/(Loss)	Treasury Stock	Retained Earnings	Noncontrolling Interest	Total Shareholders' 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	Additional Paid-In Capital	Reserve for ESOP Debt Retirement	Accumulated Other Comprehensive Income/(Loss)	Treasury Stock	Retained Earnings	Noncontrolling Interest	Total Shareholders' 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.

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine Months Ended March 31
Amounts in millions	2023		2022
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD	$	7,214	$	10,288
OPERATING ACTIVITIES
Net earnings	11,346		11,735
Depreciation and amortization	2,008		2,085
Share-based compensation expense	406		398
Deferred income taxes	(360)		(259)
Gain on sale of assets	(4)		(84)
Changes in:
Accounts receivable	(301)		(916)
Inventories	(503)		(1,252)
Accounts payable, accrued and other liabilities	(609)		1,347
Other operating assets and liabilities	(839)		(131)
Other	363		87
TOTAL OPERATING ACTIVITIES	11,507		13,010
INVESTING ACTIVITIES
Capital expenditures	(2,328)		(2,464)
Proceeds from asset sales	9		99
Acquisitions, net of cash acquired	(714)		(1,381)
Other investing activity	331		4
TOTAL INVESTING ACTIVITIES	(2,702)		(3,742)
FINANCING ACTIVITIES
Dividends to shareholders	(6,710)		(6,508)
Additions to short-term debt with original maturities of more than three months	13,778		10,146
Reductions in short-term debt with original maturities of more than three months	(9,134)		(8,163)
Net reductions to other short-term debt	(387)		(849)
Additions to long-term debt	2,569		4,385
Reductions in long-term debt	(1,877)		(2,776)
Treasury stock purchases	(7,353)		(8,753)
Impact of stock options and other	861		1,800
TOTAL FINANCING ACTIVITIES	(8,253)		(10,718)
EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(170)		(312)
CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	382		(1,762)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	7,596	$	8,526

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, 2022. 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.

2. New Accounting Pronouncements and Policies

In November 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 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 have completed our evaluation of significant transactions. The guidance has not had, and is not expected to have, a material impact on the Company's Consolidated Financial Statements.

In September 2022, the FASB issued ASU No. 2022-04, "Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations". This guidance requires annual and interim disclosures for entities that use supplier finance programs in connection with the purchase of goods and services. These amendments are effective for fiscal years beginning after December 15, 2022, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. We are currently assessing the impact of this guidance on our Consolidated Financial Statements.

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: Grooming (Appliances, Female Blades & Razors, Male Blades & Razors, Pre- and Post-Shave Products, Other Grooming);
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
	2023	2022	2023	2022
Fabric Care	23%	23%	23%	23%
Home Care	12%	12%	12%	11%
Baby Care	10%	11%	10%	10%
Skin and Personal Care	9%	9%	10%	10%
Hair Care	9%	8%	9%	9%
Family Care	9%	9%	8%	9%
Oral Care	8%	8%	8%	8%
Grooming (2)	8%	7%	8%	6%
Feminine Care	6%	6%	6%	6%
Personal Health Care	6%	6%	6%	6%
Other (2)	—%	1%	—%	2%
Total	100%	100%	100%	100%

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

(2)Effective July 1, 2022, the Grooming Sector Business Unit completed the full integration of its Shave Care and Appliances categories to cohesively serve consumers' grooming needs. This transition included the integration of the management team, strategic decision-making, innovation plans, financial targets, budgets and internal management reporting. For the three and nine months ended March 31, 2022, Appliances was presented in Other.

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/(Loss)		Net Sales		Earnings/(Loss) Before Income Taxes		Net Earnings/(Loss)
Beauty	2023	$	3,494	$	763	$	608	$	11,262	$	3,179	$	2,530
	2022	3,389		792		644		11,279		3,213		2,582
Grooming	2023	1,495		382		308		4,763		1,381		1,116
	2022	1,481		353		290		4,979		1,447		1,183
Health Care	2023	2,828		667		523		8,636		2,354		1,826
	2022	2,662		625		485		8,314		2,225		1,715
Fabric & Home Care	2023	7,016		1,538		1,174		21,130		4,619		3,517
	2022	6,699		1,275		969		20,680		4,284		3,297
Baby, Feminine & Family Care	2023	5,062		1,206		925		15,061		3,373		2,578
	2022	4,935		1,091		836		14,915		3,353		2,576
Corporate	2023	173		(268)		(114)		601		(786)		(221)
	2022	215		(65)		143		505		(177)		382
Total Company	2023	$	20,068	$	4,288	$	3,424	$	61,453	$	14,120	$	11,346
	2022	19,381		4,071		3,367		60,672		14,345		11,735

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, 2022	$	13,296	$	12,571	$	7,589	$	1,808	$	4,436	$	39,700
Acquisitions and divestitures	404		—		—		—		34		438
Translation and other	221		148		130		16		65		580
Goodwill at March 31, 2023	$	13,921	$	12,719	$	7,719	$	1,824	$	4,535	$	40,718

Goodwill increased from June 30, 2022, primarily due to an acquisition in the Beauty segment, other minor brand acquisitions in the Baby, Feminine & Family Care segment and currency translation.

Identifiable intangible assets at March 31, 2023, were comprised of:


	Gross Carrying Amount		Accumulated Amortization
Intangible assets with determinable lives	$	9,170	$	(6,335)
Intangible assets with indefinite lives	20,997		—
Total identifiable intangible assets	$	30,167	$	(6,335)

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, 2023 and 2022, was $82 and $79, respectively. For the nine months ended March 31, 2023 and 2022, amortization expense was $241 and $230, respectively.

Goodwill and indefinite-lived intangible assets are not amortized but are tested at least annually for impairment. We use the 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.

Most of our goodwill reporting units have fair value cushions that significantly exceed their underlying carrying values. In connection with the Grooming operating segment integration as described further in Note 3, we concluded that the Shave Care and Appliances categories are one reporting unit (Grooming) for goodwill impairment testing. Based on our annual impairment testing performed during the three months ended December 31, 2022, our Grooming goodwill reporting unit, which is comprised entirely of acquired businesses, has a fair value cushion of over 30% and the Gillette indefinite-lived intangible asset's fair value exceeded its carrying value by approximately 5%.

While we have concluded that no triggering event has occurred during the quarter ended March 31, 2023, the Gillette indefinite-lived intangible asset is most susceptible to future impairment risk. As of March 31, 2023, the carrying value of the Gillette indefinite-lived intangible asset was $14.1 billion. Adverse changes in the business or in the macroeconomic environment, including foreign currency devaluation, increasing global inflation, market contraction from an economic recession and the Russia-Ukraine War, could reduce the underlying cash flows used to estimate the fair value of the Gillette indefinite-lived intangible asset and trigger a future impairment charge. Further reduction of the Gillette business activities in Russia could reduce the estimated fair value by up to 5%.

The most significant assumptions utilized in the determination of the estimated fair value of the Gillette indefinite-lived intangible asset are the net sales growth rates (including residual growth rates), discount rate and royalty rates.

Net sales growth rates could be negatively impacted by reductions or changes in demand for our Gillette products, which may be caused by, among other things: changes in the use and frequency of grooming products, shifts in demand away from one or more of our higher priced products to lower priced products or 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. The residual growth rates represent the expected rate at which the Gillette brand is expected to grow beyond the shorter-term business planning period. The residual growth rates utilized in our fair value estimates are consistent with the brand operating plans and approximate 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.

Amounts in millions of dollars unless otherwise specified.

The discount rate, which is consistent with a weighted average 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.

We performed a sensitivity analysis for the Gillette indefinite-lived intangible asset as part of our annual impairment testing during the three months ended December 31, 2022, utilizing reasonably possible changes in the assumptions for the discount rate, the short-term and residual growth rates and the royalty rates 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 short-term and residual growth rates or a 50 basis-point decrease in our royalty rates, which may 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
Gillette indefinite-lived intangible asset	(6)%	(6)%	(4)%

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
	2023		2022		2023		2022
Net earnings	$	3,424	$	3,367	$	11,346	$	11,735
Less: Net earnings attributable to noncontrolling interests	27		12		77		45
Net earnings attributable to P&G (Diluted)	3,397		3,355		11,269		11,690
Less: Preferred dividends	69		68		210		208
Net earnings attributable to P&G available to common shareholders (Basic)	$	3,328	$	3,287	$	11,059	$	11,482

SHARES IN MILLIONS
Basic weighted average common shares outstanding	2,359.1		2,400.5		2,370.2		2,414.0
Add: Effect of dilutive securities
Convertible preferred shares (1)	76.0		78.9		76.7		79.7
Stock options and other unvested equity awards (2)	38.1		50.8		39.1		50.7
Diluted weighted average common shares outstanding	2,473.2		2,530.2		2,486.0		2,544.4

NET EARNINGS PER SHARE (3)
Basic	$	1.41	$	1.37	$	4.67	$	4.76
Diluted	$	1.37	$	1.33	$	4.53	$	4.59

(1)An overview of preferred shares can be found in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022.

(2)Excludes 21 million and 5 million for the three months ended March 31, 2023 and 2022, respectively, and 20 million and 11 million for the nine months ended March 31, 2023 and 2022, 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.

Amounts in millions of dollars unless otherwise specified.

6. Share-Based Compensation and Postretirement Benefits

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


	Three Months Ended March 31				Nine Months Ended March 31
	2023		2022		2023		2022
Share-based compensation expense	$	156	$	130	$	406	$	398
Net periodic benefit cost for pension benefits	45		47		132		143
Net periodic benefit credit for other retiree benefits	(131)		(126)		(395)		(348)

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, 2023.

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 during the periods presented.

Cash equivalents were $6.0 billion as of March 31, 2023 and June 30, 2022, and are classified as Level 1 within the fair value hierarchy. Other investments had a fair value of $91 and $140 as of March 31, 2023 and June 30, 2022, respectively, including equity securities of $63 and $113 as of March 31, 2023 and June 30, 2022, respectively, and are presented in Other noncurrent assets. Investments measured at fair value are 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. 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 gains/(losses) on equity securities were $2 and $(4) during the three months ended March 31, 2023 and 2022, respectively. Unrealized gains/(losses) on equity securities were $10 and $(36) during the nine months ended March 31, 2023 and 2022, respectively. These unrealized gains/(losses) are recognized in Other non-operating income, net.

The fair value of long-term debt was $25.9 billion and $25.7 billion as of March 31, 2023 and June 30, 2022, respectively. This includes the current portion of long-term debt instruments ($4.1 billion and $3.6 billion as of March 31, 2023 and June 30, 2022, respectively). 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, 2023 and June 30, 2022, are as follows:


	Notional Amount				Fair Value Asset				Fair Value (Liability)
	March 31, 2023		June 30, 2022		March 31, 2023		June 30, 2022		March 31, 2023		June 30, 2022
DERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPS
Interest rate contracts	$	4,054	$	4,972	$	—	$	3	$	(445)	$	(307)
DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS
Foreign currency interest rate contracts	$	10,349	$	7,943	$	4	$	561	$	(685)	$	(1)
TOTAL DERIVATIVES DESIGNATED AS HEDGING INSTRUMENTS	$	14,403	$	12,915	$	4	$	564	$	(1,130)	$	(308)

DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
Foreign currency contracts	$	5,698	$	5,625	$	39	$	6	$	(18)	$	(61)

TOTAL DERIVATIVES AT FAIR VALUE	$	20,101	$	18,540	$	43	$	570	$	(1,148)	$	(369)

Amounts in millions of dollars unless otherwise specified.

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 $3.6 billion and $4.7 billion as of March 31, 2023 and June 30, 2022, 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 $10.5 billion and $11.2 billion as of March 31, 2023 and June 30, 2022, respectively. The increase in the notional balance of derivative instruments designated as net investment hedges is partially offset by the decrease in debt designated as a net investment hedge due to maturities. The net increase in the total amount of instruments designated as net investment hedges is primarily driven by the Company's decision to leverage favorable interest rate spreads in the foreign currency swap market.

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.

Substantially all of the Company's financial instruments used in hedging transactions are governed by industry standard netting and collateral agreements with counterparties. If the Company's credit rating were to fall below the levels stipulated in the agreements, the counterparties could demand either collateralization or termination of the arrangements. The aggregate fair value of the instruments covered by these contractual features that are in a net liability position was $1,131 and $219 as of March 31, 2023 and June 30, 2022, respectively. The Company has not been required to post collateral as a result of these contractual features.

Before tax gains 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
	2023		2022		2023		2022
DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS (1) (2)
Foreign exchange contracts	$	(266)	$	104	$	(571)	$	530

(1) For the derivatives in net investment hedging relationships, the amount of gain excluded from effectiveness testing, which was recognized in earnings, was $64 and $18 for the three months ended March 31, 2023 and 2022, respectively. The amount of gain excluded from effectiveness testing was $179 and $50 for the nine months ended March 31, 2023 and 2022, 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/(loss) recognized in Accumulated other comprehensive income (AOCI) for such instruments was $(242) and $237 for the three months ended March 31, 2023 and 2022, respectively. The amount of gain/(loss) recognized in Accumulated other comprehensive income (AOCI) for such instruments was $(406) and $804 for the nine months ended March 31, 2023 and 2022, respectively.


	Amount of Gain/(Loss) Recognized in Earnings
	Three Months Ended March 31				Nine Months Ended March 31
	2023		2022		2023		2022
DERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPS
Interest rate contracts	$	39	$	(216)	$	(141)	$	(313)
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
Foreign currency contracts	$	38	$	(2)	$	(13)	$	28

The 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 Interest expense. The 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 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		Postretirement Benefit Plans		Foreign Currency Translation		Total AOCI
Balance at June 30, 2022	$	20	$	27	$	(12,236)	$	(12,189)
OCI before reclassifications (1)	(2)		(22)		(74)		(98)
Amounts reclassified to the Consolidated Statement of Earnings (2)	—		14		—		14
Net current period OCI	(2)		(8)		(74)		(84)
Less: OCI attributable to noncontrolling interests			—		(7)		(7)
Balance at March 31, 2023	$	18	$	19	$	(12,303)	$	(12,266)

(1)Net of tax (benefit)/expense of $(1), $(13) and $(230) for gains/losses on investment securities, postretirement benefit plans and foreign currency translation, respectively. Income tax effects within foreign currency translation include impacts from items such as net investment hedge transactions.

(2)Net of tax (benefit)/expense of $0, $7 and $0 for gains/losses on investment securities, postretirement benefit plans and foreign currency translation, respectively.

Postretirement benefit plan amounts are 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 approximately $30, 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 fiscal year ended June 30, 2022.

Amounts in millions of dollars unless otherwise specified.

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