Note 8 — Derivatives

The Company is exposed to financial market risks arising from changes in interest rates and foreign exchange rates. Changes in interest rates could affect the Company’s monetary assets and liabilities, and foreign exchange rate changes could affect the Company’s foreign currency denominated monetary assets and liabilities and forecasted transactions. The Company enters into derivative contracts with the intent of mitigating a portion of these risks.

Foreign Currency Contracts: The Company enters into foreign currency option and forward contracts to manage balance sheet and forecasted transaction foreign currency risks. The Company has not designated its foreign currency derivatives as hedges for accounting purposes. The Company’s foreign currency derivative trading strategy is to economically hedge a majority of its material exposures due to forecasted and actual intercompany cash flows, such as royalties and development costs. The Company also economically hedges its material receivable, payable and cash balances held in non-functional currencies. The Company’s foreign currency contracts are generally short-term in duration. Primary currencies hedged include the euro, the British pound sterling, the Australian dollar, the Brazilian real, the Japanese yen, the Canadian dollar, the Israeli shekel, the Indian rupee and the Czech koruna. Changes in fair value from these contracts are recorded as “Other expenses, net” in the Company’s Consolidated Statements of Operations.

At March 31, 2018, foreign currency contracts outstanding consisted of purchase and sale contracts with a total gross notional value of approximately $456 million, and durations of less than three months. The net fair value of these contracts at March 31, 2018 was a net asset of approximately $1 million, of which approximately $2 million was included in “Other current assets” and approximately $1 million was included in “Accrued expenses and other current liabilities” in the Company’s Consolidated Balance Sheet.

At March 31, 2017, foreign currency contracts outstanding consisted of purchase and sale contracts with a total gross notional value of approximately $336 million and durations of less than three months. The net fair value of these contracts at March 31, 2017 was a net asset of approximately $1 million, of which approximately $2 million was included in “Other current assets” and approximately $1 million was included in “Accrued expenses and other current liabilities” in the Company’s Consolidated Balance Sheet.

A summary of the effect of foreign currency derivatives on the Company’s Consolidated Statements of Operations was as follows:



	Amount of Net Loss Recognized in the Consolidated Statements of Operations
Location of Amounts Recognized	Year Ended March 31,
(in millions)	2018		2017		2016
Other expenses, net – foreign currency contracts	$	13	$	4	$	6

The Company is subject to collateral security arrangements with most of its major counterparties. These arrangements require the Company or the counterparty to post collateral when the derivative fair values exceed contractually established thresholds. The aggregate fair values of all derivative instruments under these collateralized arrangements were either in a net asset position or under the established threshold at March 31, 2018 and 2017. The Company posted no collateral at March 31, 2018 or 2017. Under these agreements, if the Company’s credit ratings had been downgraded one rating level, the Company would still not have been required to post collateral.