Risk Management and Derivatives (Tables)

The following tables present information about the Company’s derivative assets and liabilities measured at fair value on a recurring basis as of November 30, 2015 and May 31, 2015, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement.



	As of November 30, 2015
	Derivative Assets						Derivative Liabilities
(In millions)	Assets at Fair Value		Other Current Assets		Other Long-term Assets		Liabilities at Fair Value		Accrued Liabilities		Other Long-term Liabilities
Level 2:
Foreign exchange forwards and options⁽¹⁾	$	1,476	$	1,036	$	440	$	196	$	195	$	1
Embedded derivatives	7		2		5		10		2		8
Interest rate swaps⁽²⁾	—		—		—		5		5		—
TOTAL	$	1,483	$	1,038	$	445	$	211	$	202	$	9

(1)

If the foreign exchange derivative instruments had been netted on the Unaudited Condensed Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $196 million as of November 30, 2015. As of that date, the Company had received $725 million of cash collateral from various counterparties related to these foreign exchange derivative instruments. No amount of collateral was posted on the Company’s derivative liability balance as of November 30, 2015.


(2)	As of November 30, 2015, no amount of cash collateral had been posted on the derivative liability balance related to the Company's interest rate swaps.



	As of May 31, 2015
	Derivative Assets						Derivative Liabilities
(In millions)	Assets at Fair Value		Other Current Assets		Other Long-term Assets		Liabilities at Fair Value		Accrued Liabilities		Other Long-term Liabilities
Level 2:
Foreign exchange forwards and options⁽¹⁾	$	1,554	$	1,034	$	520	$	164	$	160	$	4
Embedded derivatives	7		2		5		11		2		9
Interest rate swaps⁽²⁾	78		78		—		—		—		—
TOTAL	$	1,639	$	1,114	$	525	$	175	$	162	$	13

(1)

If the foreign exchange derivative instruments had been netted on the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $161 million as of May 31, 2015. As of that date, the Company had received $900 million of cash collateral and $74 million of securities from various counterparties related to these foreign exchange derivative instruments. No amount of collateral was posted on the Company’s derivative liability balance as of May 31, 2015.


(2)	As of May 31, 2015, the Company had received $68 million of cash collateral related to its interest rate swaps.

The following table presents the fair values of derivative instruments included within the Unaudited Condensed Consolidated Balance Sheets as of November 30, 2015 and May 31, 2015:



	Derivative Assets					Derivative Liabilities
(In millions)	Balance Sheet Location	November 30, 2015		May 31, 2015		Balance Sheet Location	November 30, 2015		May 31, 2015
Derivatives formally designated as hedging instruments:
Foreign exchange forwards and options	Prepaid expenses and other current assets	$	860	$	825	Accrued liabilities	$	75	$	140
Interest rate swaps	Prepaid expenses and other current assets	—		78		Accrued liabilities	5		—
Foreign exchange forwards and options	Deferred income taxes and other assets	414		520		Deferred income taxes and other liabilities	1		4
Total derivatives formally designated as hedging instruments		1,274		1,423			81		144
Derivatives not designated as hedging instruments:
Foreign exchange forwards and options	Prepaid expenses and other current assets	176		209		Accrued liabilities	120		20
Embedded derivatives	Prepaid expenses and other current assets	2		2		Accrued liabilities	2		2
Foreign exchange forwards and options	Deferred income taxes and other assets	26		—		Deferred income taxes and other liabilities	—		—
Embedded derivatives	Deferred income taxes and other assets	5		5		Deferred income taxes and other liabilities	8		9
Total derivatives not designated as hedging instruments		209		216			130		31
TOTAL DERIVATIVES		$	1,483	$	1,639		$	211	$	175

The following tables present the amounts affecting the Unaudited Condensed Consolidated Statements of Income for the three and six months ended November 30, 2015 and 2014:



(In millions)	Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives⁽¹⁾						Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income⁽¹⁾
	Three Months Ended November 30,						Location of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income	Three Months Ended November 30,
	2015			2014				2015			2014
Derivatives designated as cash flow hedges:
Foreign exchange forwards and options	$	(39	)	$	(4	)	Revenues	$	(29	)	$	(19	)
Foreign exchange forwards and options	309			280			Cost of sales	125			21
Foreign exchange forwards and options	187			103			Other (income) expense, net	39			13
Interest rate swaps	(50		)	—			Interest expense (income), net	—			—
Total designated cash flow hedges	$	407		$	379			$	135		$	15


(1)	For the three months ended November 30, 2015 and 2014, the amounts recorded in Other (income) expense, net as a result of hedge ineffectiveness and the discontinuance of cash flow hedges because the forecasted transactions were no longer probable of occurring were immaterial.



(In millions)	Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives⁽¹⁾						Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income⁽¹⁾
	Six Months Ended November 30,						Location of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income	Six Months Ended November 30,
	2015⁽²⁾			2014				2015⁽²⁾			2014
Derivatives designated as cash flow hedges:
Foreign exchange forwards and options	$	(10	)	$	(42	)	Revenues	$	(75	)	$	(36	)
Foreign exchange forwards and options	205			399			Cost of sales	298			13
Foreign exchange forwards and options	—			—			Total selling and administrative expense	—			—
Foreign exchange forwards and options	122			140			Other (income) expense, net	100			18
Interest rate swaps	(50		)	—			Interest expense (income), net	—			—
Total designated cash flow hedges	$	267		$	497			$	323		$	(5	)


(1)	For the six months ended November 30, 2015 and 2014, the amounts recorded in Other (income) expense, net as a result of hedge ineffectiveness and the discontinuance of cash flow hedges because the forecasted transactions were no longer probable of occurring were immaterial.


(2)	Certain amounts have been updated to reflect the proper classification of $40 million between Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives and Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income for the three months ended August 31, 2015.



	Amount of Gain (Loss) Recognized in Income on Derivatives								Location of Gain (Loss) Recognized in Income on Derivatives
	Three Months Ended November 30,				Six Months Ended November 30,
(In millions)	2015		2014		2015		2014
Derivatives designated as fair value hedges:
Interest rate swaps⁽¹⁾	$	1	$	1	$	2	$	2	Interest expense (income), net
Derivatives not designated as hedging instruments:
Foreign exchange forwards and options	63		185		34		278		Other (income) expense, net
Embedded derivatives	—		2		—		1		Other (income) expense, net


(1)	All interest rate swaps designated as fair value hedges meet the shortcut method requirements under the accounting standards for derivatives and hedging. Accordingly, changes in the fair values of the interest rate swaps are considered to exactly offset changes in the fair value of the underlying long-term debt. Refer to “Fair Value Hedges” in this note for additional detail.