Hedging Activities

12 Months Ended

Mar. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Hedging Activities

Hedging Activities

In the normal course of business, we are exposed to interest rate and foreign exchange rate fluctuations. At times, we limit these risks through the use of derivatives such as interest rate swaps, cross currency swaps and foreign currency forward contracts. In accordance with our policy, derivatives are only used for hedging purposes. We do not use derivatives for trading or speculative purposes.

Foreign currency exchange risk

We conduct our business worldwide in U.S. dollars and the functional currencies of our foreign subsidiaries, including Euro, British pound sterling and Canadian dollars. Changes in foreign currency exchange rates could have a material adverse impact on our financial results that are reported in U.S. dollars. We are also exposed to foreign currency exchange rate risk related to our foreign subsidiaries, including intercompany loans denominated in non-functional currencies. We have certain foreign currency exchange rate risk programs that use foreign currency forward contracts and cross currency swaps. These forward contracts and cross currency swaps are generally used to offset the potential income statement effects from intercompany loans denominated in non-functional currencies. These programs reduce but do not entirely eliminate foreign exchange rate risk.

At March 31, 2017, we had €1.2 billion Euro-denominated notes and £450 million British pound sterling-denominated notes which hedge portions of our net investments in non-U.S. subsidiaries against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar (“Net Investment Hedges”). For all notes that are designated as net investment hedges and meet effectiveness requirements, the changes in carrying value of the notes attributable to the change in spot rates are recorded in Accumulated Other Comprehensive Income in the statement of stockholders’ equity where they offset foreign currency translation gains and losses recorded on our net investments.  We did not have any foreign denominated notes designated as a net investment hedge as of March 31, 2016. To the extent foreign currency denominated notes designated as net investment hedges are ineffective, changes in value are recorded in earnings.  Losses from net investment hedges recorded in other comprehensive income were $13 million for the year ended March 31, 2017. We did not have any ineffective portion of the net investment hedge as of March 31, 2017.

Derivatives Designated as Hedges

At March 31, 2017 and 2016, we had forward contracts to hedge the U.S. dollar against cash flows denominated in Canadian dollars with total gross notional amounts of $243 million and $323 million, which were designated as cash flow hedges. These contracts will mature between March 2018 and March 2020.

From time to time, we enter into cross currency swaps to hedge intercompany loans denominated in non-functional currencies. For our cross currency swap transactions, we agree with another party to exchange, at specified intervals, one currency for another currency at a fixed exchange rate, generally set at inception, calculated by reference to agreed upon notional amounts. These cross currency swaps are designed to reduce the income statement effects arising from fluctuations in foreign exchange rates and have been designated as cash flow hedges.

At March 31, 2017 and March 31, 2016, we had cross currency swaps with total gross notional amounts of approximately $2,663 million and $546 million, which are designated as cash flow hedges. These swaps will mature between February 2018 and January 2024.

For forward contracts and cross currency swaps that are designated as cash flow hedges, the effective portion of changes in the fair value of the hedges is recorded into Accumulated Other Comprehensive Income and reclassified into earnings in the same period in which the hedged transaction affects earnings. Changes in fair values representing hedge ineffectiveness are recognized in current earnings. Gains or losses on these hedges recorded in other comprehensive income and earnings were not material in 2017, 2016 and 2015.

Derivatives Not Designated as Hedges

At March 31, 2017, we had a forward contract to primarily hedge the U.S. dollar against cash flows denominated in Canadian dollars with total gross notional amounts of $173 million. This contract matured in April 2017 and was not designated for hedge accounting. Gains or losses from this contract were not material for the year ended March 31, 2017.

We also have a number of forward contracts to hedge the Euro against cash flows denominated primarily in British pound sterling and other European currencies. At March 31, 2017 and 2016, the total gross notional amounts of these contracts were $62 million and $876 million.

These contracts will mature through December 2017 and none of these contracts were designated for hedge accounting. Changes in the fair values for contracts not designated as hedges are recorded directly into earnings and accordingly, net gains of $5 million and $60 million in 2017 and 2016, and net losses of $189 million in 2015, were recorded within operating expenses. Gains or losses from these contracts are largely offset by changes in the value of the underlying intercompany foreign currency loans.

Information regarding the fair value of derivatives on a gross basis is as follows:

	Balance Sheet Caption	March 31, 2017						March 31, 2016
		Fair Value of Derivative				U.S. Dollar Notional		Fair Value of Derivative				U.S. Dollar Notional
(In millions)		Asset		Liability				Asset		Liability
Derivatives designated for hedge accounting
Foreign exchange  contracts (current)	Prepaid expenses and other	$	17	$	—	$	81	$	16	$	—	$	80
Foreign exchange  contracts (non-current)	Other Noncurrent Assets	32		—		162		46		—		243
Cross currency  swaps (current)	Prepaid expenses and other	17		—		174		—		—		—
Cross currency  swaps (non-current)	Other Noncurrent Assets/Liabilities	90		—		2,489		—		8		546
Total		$	156	$	—			$	62	$	8
Derivatives not designated for hedge accounting
Foreign exchange  contracts (current)	Prepaid expenses and other	$	1	$	—	$	198	$	23	$	—	$	680
Foreign exchange  contracts (current)	Other accrued liabilities	—		—		37		—		—		196
Total		$	1	$	—			$	23	$	—

Refer to Financial Note 22, “Fair Value Measurements,” for more information on these recurring fair value measurements.