Fair Value Measurements

6 Months Ended

Mar. 31, 2026

NOTE E – FAIR VALUE MEASUREMENTS

As required by U.S. GAAP, Ashland uses applicable guidance for defining fair value, the initial recording and periodic remeasurement of certain assets and liabilities measured at fair value and related disclosures for instruments measured at fair value. Fair value accounting guidance establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). An instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the instrument’s fair value measurement. The three levels within the fair value hierarchy are described as follows.

Level 1 – Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3 – Unobservable inputs for the asset or liability for which there is little, if any, market activity at the measurement date. Unobservable inputs reflect Ashland’s own assumptions about what market participants would use to price the asset or liability. The inputs are developed based on the best information available in the circumstances, which might include Ashland’s own financial data such as internally developed pricing models, discounted cash flow methodologies, as well as instruments for which the fair value determination requires significant management judgment.

For assets that are measured using quoted prices in active markets (Level 1), the total fair value is the published market price per unit multiplied by the number of units held without consideration of transaction costs. Assets and liabilities that are measured using significant other observable inputs (Level 2) are primarily valued by reference to quoted prices of similar assets or liabilities in active markets, adjusted for any terms specific to that asset or liability. For all other assets and liabilities for which unobservable inputs are used (Level 3), fair value is derived through the use of fair value models, such as a discounted cash flow model or other standard pricing models that Ashland deems reasonable.

The following table summarizes financial instruments subject to recurring fair value measurements as of March 31, 2026:


(In millions)	Carrying value		Total fair value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	343	$	343	$	343	$	—	$	—
Restricted investments(a)(b)		326		326		326		—		—
Investment of captive insurance company(c)		7		7		7		—		—
Commodity derivatives(d)		1		1		—		1		—
Total assets at fair value	$	677	$	677	$	676	$	1	$	—

Liabilities
Foreign currency derivatives(e)	$	2	$	2	$	—	$	2	$	—
Commodity derivatives(e)		1		1		—		1		—
Total liabilities at fair value	$	3	$	3	$	—	$	3	$	—

(a)

Includes $276 million within restricted investments and $50 million within other current assets in the Condensed Consolidated Balance Sheet.

(b)

Includes $213 million related to the Asbestos trust and $113 million related to the Environmental trust.

(c)

Included in other noncurrent assets in the Condensed Consolidated Balance Sheet.

(d)

Included in accounts receivable, net in the Condensed Consolidated Balance Sheet.

(e)

Included in accrued expenses and other liabilities in the Condensed Consolidated Balance Sheet.

The following table summarizes financial instruments subject to recurring fair value measurements as of September 30, 2025:


(In millions)	Carrying value		Total fair value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	215	$	215	$	215	$	—	$	—
Restricted investments(a)(b)		347		347		347		—		—
Investment of captive insurance company(c)		5		5		5		—		—
Commodity derivatives(d)		1		1		—		1		—
Total assets at fair value	$	568	$	568	$	567	$	1	$	—

Liabilities
Foreign currency derivatives(e)	$	1	$	1	$	—	$	1	$	—
Commodity derivatives(e)		1		1		—		1		—
Total liabilities at fair value	$	2	$	2	$	—	$	2	$	—

(a)

Includes $297 million within restricted investments and $50 million within other current assets in the Condensed Consolidated Balance Sheet.

(b)

Includes $231 million related to the Asbestos trust and $116 million related to the Environmental trust.

(c)

Included in other noncurrent assets in the Condensed Consolidated Balance Sheet.

(d)

Included in accounts receivable, net in the Condensed Consolidated Balance Sheet.

(e)

Included in accrued expenses and other liabilities in the Condensed Consolidated Balance Sheet.

Restricted investments

Ashland maintains certain investments in Company restricted renewable annual trusts for the purpose of paying future asbestos indemnity and defense costs and future environmental remediation and related litigation costs. The financial instruments are designated as investment securities, classified as Level 1 measurements within the fair value hierarchy. These investment securities were classified primarily as noncurrent restricted investment assets, with $50 million classified within other current assets, in the Condensed Consolidated Balance Sheets at both March 31, 2026 and September 30, 2025.

The following table presents gross unrealized gains and losses for the restricted investments as of:


			Gross		Gross
(In millions)	Adjusted Cost		Unrealized Gain		Unrealized Loss			Fair Value
March 31, 2026
Demand deposit	$	3	$	—	$	—		$	3
Equity mutual fund		94		60		—			154
Fixed income mutual fund		202		—		(33	)		169
Fair value	$	299	$	60	$	(33	)	$	326

September 30, 2025
Demand deposit	$	3	$	—	$	—		$	3
Equity mutual fund		103		67		—			170
Fixed income mutual fund		205		—		(31	)		174
Fair value	$	311	$	67	$	(31	)	$	347

The following table presents the investment income, net gains and losses realized, funds restricted for specific transactions, and disbursements related to restricted investments:


	Three months ended						Six months ended
	March 31						March 31
(In millions)	2026			2025			2026			2025
Investment income(a)	$	2		$	3		$	8		$	8
Net gains (losses)(a)		(5	)		3			(3	)		(14	)
Funds restricted for specific transactions		—			8			7			8
Disbursements		(18	)		(19	)		(33	)		(25	)

(a)

Included in the net interest and other expense caption within the Statements of Condensed Consolidated Comprehensive Income (Loss).

Foreign currency derivatives

Ashland conducts business in a variety of foreign currencies. Accordingly, Ashland regularly uses foreign currency derivative instruments to manage exposure on certain transactions denominated in foreign currencies to curtail potential earnings volatility effects of certain assets and liabilities, including short-term intercompany loans, denominated in currencies other than Ashland’s functional currency of an entity. These derivative contracts generally require exchange of one foreign currency for another at a fixed rate at a future date and generally have maturities of less than twelve months. All contracts are valued at fair value with net changes in fair value recorded within the selling, general and administrative expense caption within the Statements of Condensed Consolidated Comprehensive Income (Loss). The impacts of these contracts were largely offset by gains and losses resulting from the impact of changes in exchange rates on transactions denominated in non-functional currencies. The following table summarizes the gains (losses) recognized within the Statements of Condensed Consolidated Comprehensive Income (Loss):


	Three months ended					Six months ended
	March 31					March 31
(In millions)	2026			2025		2026			2025
Foreign currency derivative gains (losses)	$	(3	)	$	12	$	(2	)	$	(3	)

The following table summarizes the fair values of the outstanding foreign currency derivatives included in accounts receivable, net and accrued expenses and other liabilities of the Condensed Consolidated Balance Sheets as of:


	March 31		September 30
(In millions)	2026		2025
Foreign currency derivative assets(a)	$	—	$	—
Notional contract values		26		44

Foreign currency derivative liabilities	$	2	$	1
Notional contract values		171		128

(a)

Zero denotes less than $1 million of activity.

Commodity derivatives

Natural gas derivatives

To manage its exposure to the market price volatility of natural gas consumed by its U.S. plants during the manufacturing process, Ashland regularly enters into forward contracts that are designated as cash flow hedges.

The following table summarizes the net gains (losses) recognized within the cost of sales caption of the Statements of Condensed Consolidated Comprehensive Income (Loss):


	Three months ended				Six months ended
	March 31				March 31
(In millions)	2026		2025		2026		2025
Commodity derivative gains (losses)	$	1	$	—	$	1	$	(1	)

The following table summarizes the fair values of the outstanding natural gas derivatives included in accounts receivable, net and accrued expenses and other liabilities of the Condensed Consolidated Balance Sheets as of:


	March 31		September 30
(In millions)	2026		2025
Commodity derivative assets	$	1	$	1
Notional contract values		2		6

Commodity derivative liabilities	$	1	$	1
Notional contract values		9		7

Other commodity derivatives

During the three months ended March 31, 2026, Ashland entered into a series of forward contracts to manage its exposure to the market volatility of butane consumed by its U.S. plants during the manufacturing process. These derivative instruments qualify as a hedge of future cash flows, are recognized as either assets or liabilities on the Condensed Consolidated Balance Sheets and are measured at fair value. Gains and losses related to an instrument that qualifies for hedge accounting are either recognized in the Statements of Condensed Consolidated Comprehensive Income (Loss) immediately to offset the gain or loss on the hedged item, or deferred and recorded in the stockholders’ equity section of the Condensed Consolidated Balance Sheets as a component of accumulated other comprehensive loss and subsequently recognized in the Statements of Condensed Consolidated Comprehensive Income (Loss) when the hedged item affects net income (loss). Cash flows from derivative financial instruments designated as cash flow hedges are classified as cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows for the relevant period. These contracts did not have a material impact on Ashland’s Condensed Consolidated Financial Statements during the three and six months ended March 31, 2026.

Other financial instruments

At March 31, 2026 and September 30, 2025, Ashland's long-term debt (including the current portion and excluding debt issuance cost discounts) had a carrying value of $1,383 million and $1,394 million, respectively, compared to a fair value of $1,333 million and $1,366 million, respectively. The fair values of long-term debt are based on quoted market prices (level 1 of the fair value hierarchy).

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

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+ Details

ASHLAND INC. 10-Q