Derivative Instruments

9 Months Ended

Dec. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

The following table presents the fair values of derivative instruments included in the unaudited Condensed Consolidated Balance Sheets:

	Derivative Assets
		As of
(in millions)	Balance sheet line item	December 30, 2016		April 1, 2016
Derivatives designated for hedge accounting:
Interest rate swaps	Other assets	$	5	$	—
Foreign Currency forward contracts	Prepaid expenses and other current assets	9		3
Total fair value of derivatives designated for hedge accounting		$	14	$	3
Derivatives not designated for hedge accounting:
Foreign Currency forward contracts	Prepaid expenses and other current assets	$	11	$	12
Total fair value of derivatives not designated for hedge accounting		$	11	$	12

	Derivative Liabilities
		As of
(in millions)	Balance sheet line item	December 30, 2016		April 1, 2016
Derivatives designated for hedge accounting:
Interest rate swaps	Other long-term liabilities	$	1	$	—
Foreign Currency forward contracts	Accrued expenses and other current liabilities	—		4
Total fair value of derivatives designated for hedge accounting:		$	1	$	4
Derivatives not designated for hedge accounting:
Foreign Currency forward contracts	Accrued expenses and other current liabilities	$	34	$	7
Total fair value of derivatives not designated for hedge accounting		$	34	$	7

Derivatives designated for hedge accounting

Cash flow hedges

As of December 30, 2016, the Company had a series of interest rate swap agreements with a total notional amount of $602 million. These instruments were designated as cash flow hedges of the variability of cash outflows for interest payments on certain floating interest rate debt, which effectively converted the debt into fixed interest rate debt. During the three months ended December 30, 2016 the Company terminated certain interest rate swap agreements which had aggregate notional values of $18 million and fair values of less than $1 million and derecognized the related derivative liability. The total hedge loss of less than $1 million was recognized as interest expense in the unaudited Condensed Consolidated Statements of Operations.

For the three months ended December 30, 2016, the Company performed both retrospective and prospective hedge effectiveness analysis for the interest rate swaps designated as cash flow hedges. The Company applied the long-haul method outlined in ASC 815, “Derivatives and Hedging,” to assess retrospective and prospective effectiveness of the interest rate swaps. A quantitative effectiveness analysis assessment of the hedging relationship was performed using regression analysis. As of December 30, 2016, the Company has determined that the hedging relationship was highly effective.

The Company has designated certain foreign currency forward contracts as cash flow hedges, to reduce risks related to certain Indian Rupee denominated intercompany obligations and forecasted transactions. The notional amount of foreign currency forward contracts designated as cash flow hedges as of December 30, 2016 was $371 million and the related forecasted transactions extend through March 2019.

For the three months ended December 30, 2016, the Company performed an assessment at the inception of the cash flow hedge transactions that determined that all critical terms of the hedging instruments and hedged items match; therefore, there is no ineffectiveness to be recorded and all changes in the hedging instruments’ fair value are recorded in accumulated other comprehensive loss (OCI) and subsequently reclassified into earnings in the period during which the hedged transactions are recognized in earnings. The Company performs an assessment of critical terms on an on-going basis throughout the hedging period. During the three months ended December 30, 2016, the Company had no cash flow hedges for which it was probable that the hedged transaction would not occur. As of December 30, 2016, approximately $8 million of the existing gains related to the cash flow hedges reported in accumulated OCI are expected to be reclassified into earnings within the next 12 months.

Derivatives not designated for hedge accounting

Total return swaps

During fiscal 2016, the Company had total return swaps derivative contracts (TRS) to manage exposure to market volatility of the notional investments underlying the Company's deferred compensation obligations. For accounting purposes, these TRS are not designated as hedges, as defined under ASC 815 and all changes in their fair value and changes in the associated deferred compensation liabilities are recorded in cost of services and selling, general and administrative expenses.

Foreign currency derivatives

The Company manages exposure to fluctuations in foreign currencies by using short-term foreign currency forward contracts to economically hedge certain foreign currency denominated assets and liabilities, including intercompany accounts and loans. For accounting purposes, these foreign currency option and forward contracts are not designated as hedges, as defined under ASC 815, “Derivatives and Hedging,” and all changes in their fair value are reported in current period earnings within the other income (expense) line of the unaudited Condensed Consolidated Statements of Operations. The notional amount of the foreign currency forward contracts outstanding as of December 30, 2016 was $1.9 billion.

The following table presents the amounts included within income (loss) from continuing operations, before taxes related to derivatives not designated for hedge accounting, net of remeasurement gains and losses:

		Three months ended					Nine months ended
(in millions)	Statement of Operations line item	December 30, 2016		January 1, 2016			December 30, 2016			January 1, 2016
Total return swaps	Cost of services and Selling, general & administrative expenses	$	—	$	2		$	—		$	(1	)
Foreign currency forwards	Other income (expense), net	2		(7		)	(3		)	(6		)
Total		$	2	$	(5	)	$	(3	)	$	(7	)

Other risks

As discussed further in Note 7 - Fair Value, the Company is exposed to the risk of losses in the event of non-performance by the counterparties to its derivative contracts. To mitigate counterparty credit risk, the Company regularly reviews its credit exposure and the creditworthiness of the counterparties. The Company also enters into enforceable master netting arrangements with some of its counterparties. However, for financial reporting purposes it is the Company’s policy to not offset derivative assets and liabilities despite the existence of enforceable master netting arrangements with some of its counterparties.