NOTE 7. FINANCIAL ASSETS AND LIABILITIES

Financial Assets and Liabilities Measured at Fair Value

The following table presents the Company’s financial assets and financial liabilities that are measured at fair value on a recurring basis at March 31, 2026 and 2025.

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The gross balances of derivative assets, including accrued interest, are contained within Prepaid expenses and other current assets and Other noncurrent assets, and the gross balances of derivative liabilities are contained within

Other accrued expenses and liabilities, or Other noncurrent liabilities in the Consolidated Balance Sheet. The Company may enter into master netting agreements with certain counterparties that allow for netting of exposures. There was no netting of derivative assets against liabilities in the Consolidated Balance Sheet at March 31, 2026 and 2025. The Company manages counterparty risk by seeking counterparties of high credit quality and by monitoring credit ratings, credit spreads and other relevant public information about its counterparties. The Company does not anticipate nonperformance by any of the counterparties.

Financial Assets and Liabilities Not Measured at Fair Value

Accounts receivable are financial assets with carrying values that approximate fair value. Accounts payable, other accrued expenses and short-term debt are financial liabilities with carrying values that approximate fair value. If measured at fair value in the consolidated financial statements, these financial instruments would be classified as Level 3 in the fair value hierarchy, except for short-term debt, which would be classified as Level 2.

The Company also has time deposits that have maturities of 90 days or less, and their carrying values approximate fair value. They are measured for impairment on a recurring basis by comparing their fair value with their amortized cost basis. There were no impairments of financial assets recognized for any of the periods presented. The balance of these time deposits with maturities of 90 days or less contained within Cash and cash equivalents in the Consolidated Balance Sheet at March 31, 2026 and 2025 was $1.7 billion and $765 million, respectively. If measured at fair value in the consolidated financial statements, time deposits with maturities of 90 days or less would be categorized as Level 2 in the fair value hierarchy.

The fair value of our outstanding debt (excluding finance lease obligations) is based on various methodologies, including quoted prices in active markets for identical debt instruments, which is a Level 1 measurement, or calculated fair value using an expected present value technique that uses rates currently available to the Company for debt in active markets with similar terms and remaining maturities, which is a Level 2 measurement. See Note 12 – Borrowings for additional information. Our outstanding debt (excluding finance lease obligations) had a carrying value of $3.9 billion and $2.9 billion as of March 31, 2026 and 2025, respectively. The debt had an estimated fair value of $3.6 billion and $2.7 billion as of March 31, 2026 and 2025, respectively.

Derivative Financial Instruments

The following table summarizes the notional amounts of the Company’s outstanding derivatives:

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The notional amounts of derivative instruments do not necessarily represent the amounts exchanged by the Company with third parties and are not necessarily a direct measure of the financial exposure.

Derivatives Designated as Hedging Instruments

Cash Flow Hedges

The Company has foreign exchange derivative financial instruments designated as cash flow hedges to manage the volatility of cash flows that relate to operating expenses and intercompany payments for royalties denominated in certain currencies. At March 31, 2026, the maximum remaining length of time over which the Company has hedged its

exposure is approximately one year. At March 31, 2026 and 2025, the weighted-average remaining maturity of these instruments was approximately 0.5 years. At March 31, 2026 and 2025, in connection with cash flow hedges of foreign currency transactions, the Company had unrealized losses of $7 million and unrealized losses of $1 million (each before taxes), respectively, in AOCI. The Company estimates that $7 million (before taxes) of deferred net losses on derivatives in AOCI at March 31, 2026 will be reclassified to net income within the next twelve months, providing an offsetting economic impact against the underlying anticipated transactions.

Net Investment Hedges

The Company has entered into and designated cross-currency interest rate swap contracts and currency forward contracts as net investment hedges to mitigate foreign exchange exposure related to net investments. Under the terms of the cross-currency swaps, the Company makes fixed-rate payments in foreign currencies and receives fixed-rate amounts in U.S. dollars, with the exchange of the underlying notional amounts at maturity whereby the Company will receive U.S. dollars and pay foreign currencies at exchange rates which are determined at contract inception. Under the terms of the currency forward contracts, the Company commits to sell the local currency of certain subsidiaries in exchange for U.S. dollars at specified forward rates. At March 31, 2026, the maximum remaining length of time over which the Company has hedged its exposure is approximately eight years. At March 31, 2026 and 2025, the weighted-average remaining maturity of these instruments was approximately three years. At March 31, 2026 and 2025, the Company had unrealized losses of $81 million and unrealized losses of $6 million (each before taxes), respectively, in AOCI related to net investment hedges. As of March 31, 2026, $39 million of these unrealized losses relate to settled instruments.

Derivatives Not Designated as Hedging Instruments

The Company enters into currency forward and swap contracts to hedge exposures related to assets, liabilities and earnings across its subsidiaries. The terms of these contracts are generally less than one year.

The Effect of Derivative Instruments in the Consolidated Income Statement

The effects of derivatives designated as hedging instruments on the Consolidated Income Statement and Other Comprehensive Income are as follows:

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For the years ended March 31, 2026, 2025 and 2024, there were no gains or losses excluded from the assessment of hedge effectiveness for cash flow hedges. For the year ended March 31, 2026, the gains or losses due to underlying exposure that did not occur or was not expected to occur were immaterial. For years ended March 31, 2025 and 2024, there were no such gains or losses.

The effects of derivatives not designated as hedging instruments on the Consolidated Income Statement are as follows:

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For the years ended March 31, 2026, 2025 and 2024, our net expense (income) included losses of $37 million, $1 million, and $14 million (each before taxes), respectively, from foreign currency transactions.

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