Cumulative upward adjustments to non-marketable equity securities

[Table of Contents](#if58bf2b7da5f49b78db442640b215d13_7)The following table summarizes our cash equivalents and available-for-sale debt securities by balance sheet classification and level in the fair value hierarchy at the dates indicated.

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|  | April 30, 2022 |  | July 31, 2021 |
| (In millions) | Level 1 |  | Level 2 |  |  |  | Total Fair Value |  | Level 1 |  | Level 2 |  |  |  | Total Fair Value |
| Cash equivalents: |   |  |   |  |  |  |   |  |   |  |   |  |  |  |   |
| In cash and cash equivalents | $ | 2,610  |  |  | $ | —  |  |  |  |  | $ | 2,610  |  |  | $ | 1,660  |  |  | $ | —  |  |  |  |  | $ | 1,660  |  |
| In funds held for customers | 17  |  |  | —  |  |  |  |  | 17  |  |  | —  |  |  | —  |  |  |  |  | —  |  |
| Total cash equivalents | $ | 2,627  |  |  | $ | —  |  |  |  |  | $ | 2,627  |  |  | $ | 1,660  |  |  | $ | —  |  |  |  |  | $ | 1,660  |  |
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| Available-for-sale debt securities: |   |  |   |  |  |  |   |  |   |  |   |  |  |  |   |
| In investments | $ | —  |  |  | $ | 373  |  |  |  |  | $ | 373  |  |  | $ | —  |  |  | $ | 1,308  |  |  |  |  | $ | 1,308  |  |
| In funds held for customers | —  |  |  | 200  |  |  |  |  | 200  |  |  | —  |  |  | 200  |  |  |  |  | 200  |  |
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| Total available-for-sale debt securities | $ | —  |  |  | $ | 573  |  |  |  |  | $ | 573  |  |  | $ | —  |  |  | $ | 1,508  |  |  |  |  | $ | 1,508  |  |

We value our Level 1 assets, consisting primarily of money market funds and time deposits, using quoted prices in active markets for identical instruments. Financial assets whose fair values we measure on a recurring basis using Level 2 inputs consist of municipal bonds, corporate notes, and U.S. agency securities. We measure the fair values of these assets with the help of a pricing service that either provides quoted market prices in active markets for identical or similar securities or uses observable inputs for their pricing without applying significant adjustments. Our fair value processes include controls designed to ensure that we record appropriate fair values for our Level 2 investments. These controls include comparison to pricing provided by a secondary pricing service or investment manager, validation of pricing sources and models, review of key model inputs, analysis of period-over-period price fluctuations, and independent recalculation of prices where appropriate.Financial liabilities whose fair values we measure using Level 2 inputs consist of senior unsecured notes. See Note 7, “Long-Term Obligations and Commitments,” for more information. We measure the fair value of our senior unsecured notes based on their trading prices and the interest rates we could obtain for other borrowings with similar terms.There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the nine months ended April 30, 2022.

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| Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis |

Long-term investments represent non-marketable equity securities in privately held companies that do not have a readily determinable fair value. They are accounted for at cost and adjusted based on observable price changes from orderly transactions for identical or similar investments of the same issuer or impairment. These investments are classified as Level 3 in the fair value hierarchy because we estimate the value based on valuation methods which may include a combination of the observable transaction price at the transaction date and other unobservable inputs including volatility, rights, and obligations of the investments we hold. We recognized $8 million of upward adjustments during the three months ended April 30, 2022 and $54 million of upward adjustments during the nine months ended April 30, 2022. We recognized no upward adjustments during the three months ended April 30, 2021 and $17 million of upward adjustments during the nine months ended April 30, 2021. Impairments recognized during the three and nine months ended April 30, 2022 and April 30, 2021 were immaterial. Cumulative upward adjustments were $71 million and cumulative impairments were immaterial through April 30, 2022 for measurement alternative investments held as of April 30, 2022. As of April 30, 2022 and July 31, 2021, the carrying value of long-term investments was $98 million and $43 million, respectively. 

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| 3. Cash and Cash Equivalents, Investments, and Funds Held for Customers |

We consider highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. In all periods presented, cash equivalents consist primarily of money market funds and time deposits. Investments consist primarily of investment-grade available-for-sale debt securities. Funds held for customers represent cash held on behalf of our customers that is invested in cash and cash equivalents and investment-grade available-for-sale securities, restricted for use solely for the purpose of satisfying amounts we owe on behalf of our customers. Except for direct obligations of the United States government, securities issued by agencies of the United States government, and money market funds, we diversify our investments in debt securities by limiting our holdings with any individual issuer.

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|  |  Intuit Q3 Fiscal 2022 Form 10-Q | 15 |  |


