beatandraise : SEC Filings Research with AI

beatandraise.com

2.2.0.7 false Risk Management and Derivatives 126 - Disclosure - Risk Management and Derivatives true false false false 1 USD false false iso4217_USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 iso4217_USD_per_shares Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares 0 $ 5 Risk Management and Derivatives 3 us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock us-gaap true na duration No definition available. false false false false false false false false false false false false 1 false false false false 0 0 <div> Note 18 — Risk Management and Derivatives The Company is exposed to global market risks, including the effect of changes in foreign currency exchange rates and interest rates, and uses derivatives to manage financial exposures that occur in the normal course of business. The Company does not hold or issue derivatives for speculative trading purposes. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking hedge transactions. This process includes linking all derivatives to either specific firm commitments or forecasted transactions. The Company also enters into foreign exchange forwards to mitigate the change in fair value of specific assets and liabilities on the balance sheet, which are not designated as hedging instruments under the accounting standards for derivatives and hedging. Accordingly, changes in the fair value of hedges of recorded balance sheet positions are recognized immediately in other (income) expense, net, on the income statement together with the transaction gain or loss from the hedged balance sheet position. The Company classifies the cash flows at settlement from these undesignated hedges in the same category as the cash flows from the related hedged items, generally within the cash provided by operations component of the cash flow statement. The majority of derivatives outstanding as of May 31, 2010 are designated as either cash flow, fair value or net investment hedges under the accounting standards for derivatives and hedging. All derivatives are recognized on the balance sheet at their fair value and classified based on the instrument’s maturity date. The total notional amount of outstanding derivatives as of May 31, 2010 was $6.2 billion, which was primarily comprised of cash flow hedges denominated in Euros, Japanese Yen and British Pounds. The following table presents the fair values of derivative instruments included within the consolidated balance sheet as of May 31, 2010 and 2009:   <table border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr> <td width="45%"></td> <td valign="bottom" width="2%"></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="7" align="center">Asset Derivatives</td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="7" align="center">Liability Derivatives</td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center">Balance Sheet Classification</td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">May 31, 2010</td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">May 31, 2009</td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center">Balance Sheet Classification</td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">May 31, 2010</td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">May 31, 2009</td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="15" align="center">(In millions)</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Derivatives formally designated as hedging instruments: </td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> Foreign exchange forwards and options </td> <td valign="bottom"> </td> <td valign="bottom">Prepaid expenses and other current assets</td> <td valign="bottom"> </td> <td valign="top">$</td> <td valign="top" align="right">315.9</td> <td valign="bottom"> </td> <td valign="top">$</td> <td valign="top" align="right">270.4</td> <td valign="bottom"> </td> <td valign="top">Accrued liabilities</td> <td valign="bottom"> </td> <td valign="top">$</td> <td valign="top" align="right">24.7</td> <td valign="bottom"> </td> <td valign="top">$</td> <td valign="top" align="right">34.6</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Interest rate swap contracts </td> <td valign="bottom"> </td> <td valign="bottom">Prepaid expenses and other current assets</td> <td valign="bottom"> </td> <td valign="top"> </td> <td valign="top" align="right">—</td> <td valign="bottom"> </td> <td valign="top"> </td> <td valign="top" align="right">0.1</td> <td valign="bottom"> </td> <td valign="top">Accrued liabilities</td> <td valign="bottom"> </td> <td valign="top"> </td> <td valign="top" align="right">—</td> <td valign="bottom"> </td> <td valign="top"> </td> <td valign="top" align="right">—</td> </tr> <tr> <td valign="top"> Foreign exchange forwards and options </td> <td valign="bottom"> </td> <td valign="bottom">Deferred income taxes and other assets</td> <td valign="bottom"> </td> <td valign="top"> </td> <td valign="top" align="right">0.4</td> <td valign="bottom"> </td> <td valign="top"> </td> <td valign="top" align="right">81.3</td> <td valign="bottom"> </td> <td valign="top">Deferred income taxes and other liabilities</td> <td valign="bottom"> </td> <td valign="top"> </td> <td valign="top" align="right">0.1</td> <td valign="bottom"> </td> <td valign="top"> </td> <td valign="top" align="right">—</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Interest rate swap contracts </td> <td valign="bottom"> </td> <td valign="bottom">Deferred income taxes and other assets</td> <td valign="bottom"> </td> <td valign="top"> </td> <td valign="top" align="right">14.6</td> <td valign="bottom"> </td> <td valign="top"> </td> <td valign="top" align="right">13.7</td> <td valign="bottom"> </td> <td valign="top">Deferred income taxes and other liabilities</td> <td valign="bottom"> </td> <td valign="top"> </td> <td valign="top" align="right">—</td> <td valign="bottom"> </td> <td valign="top"> </td> <td valign="top" align="right">—</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> </tr> <tr> <td valign="top"> Total derivatives formally designated as hedging instruments </td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">330.9</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">365.5</td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">24.8</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">34.6</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Derivatives not designated as hedging instruments: </td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> Foreign exchange forwards and options </td> <td valign="bottom"> </td> <td valign="bottom">Prepaid expenses and other current assets</td> <td valign="bottom"> </td> <td valign="top">$</td> <td valign="top" align="right">103.9</td> <td valign="bottom"> </td> <td valign="top">$</td> <td valign="top" align="right">12.8</td> <td valign="bottom"> </td> <td valign="top">Accrued liabilities</td> <td valign="bottom"> </td> <td valign="top">$</td> <td valign="top" align="right">138.9</td> <td valign="bottom"> </td> <td valign="top">$</td> <td valign="top" align="right">34.3</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Foreign exchange forwards and options </td> <td valign="bottom"> </td> <td valign="bottom">Deferred income taxes and other assets</td> <td valign="bottom"> </td> <td valign="top"> </td> <td valign="top" align="right">—</td> <td valign="bottom"> </td> <td valign="top"> </td> <td valign="top" align="right">0.4</td> <td valign="bottom"> </td> <td valign="top">Deferred income taxes and other liabilities</td> <td valign="bottom"> </td> <td valign="top"> </td> <td valign="top" align="right">1.4</td> <td valign="bottom"> </td> <td valign="top"> </td> <td valign="top" align="right">—</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> </tr> <tr> <td valign="top"> Total derivatives not designated as hedging instruments </td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">103.9</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">13.2</td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">140.3</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">34.3</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Total derivatives </td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">434.8</td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">378.7</td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">165.1</td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">68.9</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> </tr> </table>   The following tables present the amounts affecting the consolidated statements of income for years ended May 31, 2010 and 2009:   <table border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr> <td width="36%"></td> <td valign="bottom" width="8%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="8%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="8%"></td> <td></td> <td valign="bottom" width="8%"></td> <td></td> <td></td> <td valign="bottom" width="8%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="6" align="center">Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives(1)</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="7" align="center">Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income(1)</td> <td valign="bottom"> </td> </tr> <tr> <td valign="bottom" nowrap="nowrap"> Derivatives formally designated </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">Year Ended May 31, 2010</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">Year Ended May 31, 2009</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center">Location of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income Into Income(1)</td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">Year Ended May 31, 2010</td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">Year Ended May 31, 2009</td> <td valign="bottom"> </td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="15" align="center">(In millions)</td> <td valign="bottom"> </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Derivatives designated as cash flow hedges: </td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> Foreign exchange forwards and options </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(29.9</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">106.3</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">Revenue</td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">51.4</td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">92.7</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Foreign exchange forwards and options </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">89.0</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">350.1</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">Cost of sales</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">60.0</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(13.5</td> <td valign="bottom" nowrap="nowrap">) </td> </tr> <tr> <td valign="bottom"> Foreign exchange forwards and options </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">4.7</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(0.4</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">Selling and administrative expense</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1.0</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0.8</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="bottom"> Foreign exchange forwards and options </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">51.1</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">165.1</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">Other (income) expense, net</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">56.1</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">67.8</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> </tr> <tr> <td valign="top"> Total designated cash flow hedges </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">114.9</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">621.1</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">168.5</td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">147.8</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Derivatives designated as net investment hedges: </td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> Foreign exchange forwards and options </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">66.0</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">161.4</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">Other (income) expense, net</td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—</td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> </table>   <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td valign="top" width="3%" align="left">(1)</td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> For the year ended May 31, 2010, $5.2 million of income was recorded to other (income) expense, net as a result of cash flow hedge ineffectiveness. For the year ended May 31, 2009, an immaterial amount of ineffectiveness from cash flow hedges was recorded in other (income) expense, net. </td> </tr> </table>   <table border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr> <td width="53%"></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td width="27%"></td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="6" align="center">Amount of Gain (Loss) recognized in Income on Derivatives</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">Year Ended May 31, 2010</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">Year Ended May 31, 2009</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center"> Location of Gain (Loss) Recognized in Income on Derivatives </td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="6" align="center">(In millions)</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Derivatives designated as fair value hedges: </td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> Interest rate swaps(1) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">7.4</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1.5</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">Interest expense (income), net</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Derivatives not designated as hedging instruments: </td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> Foreign exchange forwards and options </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(91.1</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(83.0</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">Other (income) expense, net</td> </tr> </table>   <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td valign="top" width="3%" align="left">(1)</td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> All interest rate swap agreements meet the shortcut method requirements under the accounting standards for derivatives and hedging. Accordingly, changes in the fair values of the interest rate swap agreements are exactly offset by changes in the fair value of the underlying long-term debt. Refer to section “Fair Value Hedges” for additional detail. </td> </tr> </table> Refer to Note 5 — Accrued Liabilities for derivative instruments recorded in accrued liabilities, Note 6 —Fair Value Measurements for a description of how the above financial instruments are valued, Note 14 — Accumulated Other Comprehensive Income and the Consolidated Statement of Shareholders’ Equity for additional information on changes in other comprehensive income for the years ended May 31, 2010 and 2009.   Cash Flow Hedges The purpose of the Company’s foreign currency hedging activities is to protect the Company from the risk that the eventual cash flows resulting from transactions in foreign currencies, including revenues, product costs, selling and administrative expenses, investments in U.S. dollar-denominated available-for-sale debt securities and intercompany transactions, including intercompany borrowings, will be adversely affected by changes in exchange rates. It is the Company’s policy to utilize derivatives to reduce foreign exchange risks where internal netting strategies cannot be effectively employed. Hedged transactions are denominated primarily in Euros, British Pounds and Japanese Yen. The Company hedges up to 100% of anticipated exposures typically 12 months in advance, but has hedged as much as 34 months in advance. All changes in fair values of outstanding cash flow hedge derivatives, except the ineffective portion, are recorded in other comprehensive income until net income is affected by the variability of cash flows of the hedged transaction. In most cases, amounts recorded in other comprehensive income will be released to net income some time after the maturity of the related derivative. The consolidated statement of income classification of effective hedge results is the same as that of the underlying exposure. Results of hedges of revenue and product costs are recorded in revenue and cost of sales, respectively, when the underlying hedged transaction affects net income. Results of hedges of selling and administrative expense are recorded together with those costs when the related expense is recorded. Results of hedges of anticipated purchases and sales of U.S. dollar-denominated available-for-sale securities are recorded in other (income) expense, net when the securities are sold. Results of hedges of anticipated intercompany transactions are recorded in other (income) expense, net when the transaction occurs. The Company classifies the cash flows at settlement from these designated cash flow hedge derivatives in the same category as the cash flows from the related hedged items, generally within the cash provided by operations component of the cash flow statement. Premiums paid on options are initially recorded as deferred charges. The Company assesses the effectiveness of options based on the total cash flows method and records total changes in the options’ fair value to other comprehensive income to the degree they are effective. As of May 31, 2010, $187.2 million of deferred net gains (net of tax) on both outstanding and matured derivatives accumulated in other comprehensive income are expected to be reclassified to net income during the next 12 months as a result of underlying hedged transactions also being recorded in net income. Actual amounts ultimately reclassified to net income are dependent on the exchange rates in effect when derivative contracts that are currently outstanding mature. As of May 31, 2010, the maximum term over which the Company is hedging exposures to the variability of cash flows for its forecasted and recorded transactions is 18 months. The Company formally assesses both at a hedge’s inception and on an ongoing basis, whether the derivatives that are used in the hedging transaction have been highly effective in offsetting changes in the cash flows of hedged items and whether those derivatives may be expected to remain highly effective in future periods. Effectiveness for cash flow hedges is assessed based on forward rates. When it is determined that a derivative is not, or has ceased to be, highly effective as a hedge, the Company discontinues hedge accounting prospectively. The Company discontinues hedge accounting prospectively when (1) it determines that the derivative is no longer highly effective in offsetting changes in the cash flows of a hedged item (including hedged items such as firm commitments or forecasted transactions); (2) the derivative expires or is sold, terminated, or exercised; (3) it is no longer probable that the forecasted transaction will occur; or (4) management determines that designating the derivative as a hedging instrument is no longer appropriate.   When the Company discontinues hedge accounting because it is no longer probable that the forecasted transaction will occur in the originally expected period, or within an additional two-month period of time thereafter, the gain or loss on the derivative remains in accumulated other comprehensive income and is reclassified to net income when the forecasted transaction affects net income. However, if it is probable that a forecasted transaction will not occur by the end of the originally specified time period or within an additional two-month period of time thereafter, the gains and losses that were accumulated in other comprehensive income will be recognized immediately in net income. In all situations in which hedge accounting is discontinued and the derivative remains outstanding, the Company will carry the derivative at its fair value on the balance sheet, recognizing future changes in the fair value in other (income) expense, net. For the year ended May 31, 2010, $5.2 million of income was recorded to other (income) expense, net as a result of cash flow hedge ineffectiveness. For the years ended 2009 and 2008, the Company recorded in other (income) expense an immaterial amount of ineffectiveness from cash flow hedges. Fair Value Hedges The Company is also exposed to the risk of changes in the fair value of certain fixed-rate debt attributable to changes in interest rates. Derivatives currently used by the Company to hedge this risk are receive-fixed, pay-variable interest rate swaps. As of May 31, 2010, all interest rate swap agreements are designated as fair value hedges of the related long-term debt and meet the shortcut method requirements under the accounting standards for derivatives and hedging. Accordingly, changes in the fair values of the interest rate swap agreements are exactly offset by changes in the fair value of the underlying long-term debt. The cash flows associated with the Company’s fair value hedges are periodic interest payments while the swaps are outstanding, which are reflected in net income within the cash provided by operations component of the cash flow statement. No ineffectiveness has been recorded to net income related to interest rate swaps designated as fair value hedges for the years ended May 31, 2010, 2009 and 2008. In fiscal 2003, the Company entered into a receive-floating, pay-fixed interest rate swap agreement related to a Japanese Yen denominated intercompany loan with one of the Company’s Japanese subsidiaries. This interest rate swap was not designated as a hedge under the accounting standards for derivatives and hedging. Accordingly, changes in the fair value of the swap were recorded to net income each period through maturity as a component of interest expense (income), net. Both the intercompany loan and the related interest rate swap matured during the year ended May 31, 2009. Net Investment Hedges The Company also hedges the risk of variability in foreign-currency-denominated net investments in wholly-owned international operations. All changes in fair value of the derivatives designated as net investment hedges, except ineffective portions, are reported in the cumulative translation adjustment component of other comprehensive income along with the foreign currency translation adjustments on those investments. The Company classifies the cash flows at settlement of its net investment hedges within the cash used by investing component of the cash flow statement. The Company assesses hedge effectiveness based on changes in forward rates. The Company recorded no ineffectiveness from its net investment hedges for the years ended May 31, 2010, 2009, and 2008. Credit Risk The Company is exposed to credit-related losses in the event of non-performance by counterparties to hedging instruments. The counterparties to all derivative transactions are major financial institutions with investment grade credit ratings. However, this does not eliminate the Company’s exposure to credit risk with these institutions. This credit risk is limited to the unrealized gains in such contracts should any of these counterparties fail to perform as contracted. To manage this risk, the Company has established strict counterparty credit guidelines that are continually monitored and reported to senior management according to prescribed guidelines. The Company utilizes a portfolio of financial institutions either headquartered or operating in the same countries the Company conducts its business. As a result of the above considerations, the Company considers the impact of the risk of counterparty default to be immaterial. Certain of the Company’s derivative instruments contain credit risk related contingent features. As of May 31, 2010, the Company was in compliance with all such credit risk related contingent features. The aggregate fair value of derivative instruments with credit risk related contingent features that are in a net liability position at May 31, 2010 was $18.3 million. The Company was not required to post any collateral as a result of these contingent features. </div> Note 18 — Risk Management and Derivatives The Company is exposed to global market risks, including the effect of changes in foreign currency exchange false false false us-types:textBlockItemType textblock This element can be used to disclose the entity's entire derivative instruments and hedging activities disclosure as a single block of text. Describes an entity's risk management strategies, derivatives in hedging activities and non-hedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising there from, and the amounts of and methodologies and assumptions used in determining the amounts of such items. Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 45 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44 false 1 1 false UnKnown UnKnown UnKnown false true