DERIVATIVES

3 Months Ended

Jan. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

11.

DERIVATIVES

We are exposed to foreign currency exchange rate fluctuations and interest rate changes in the normal course of our business. As part of our risk management strategy, we use derivative instruments, primarily forward contracts to hedge economic and/or accounting exposures resulting from changes in foreign currency exchange rates.

Cash Flow Hedges

We enter into foreign exchange contracts to hedge our forecasted operational cash flow exposures resulting from changes in foreign currency exchange rates. These foreign exchange contracts, carried at fair value, have maturities between one and fourteen months. These derivative instruments are designated and qualify as cash flow hedges under the criteria prescribed in the authoritative guidance. The changes in the value of the derivative instrument included in the assessment of effectiveness are recognized in accumulated other comprehensive income and reclassified into earnings when the forecasted transaction occurs in the same financial statement line item in the condensed consolidated statement of operations where the earnings effect of the

hedged item is presented. If it becomes probable that the forecasted transaction will not occur, the hedge relationship will be de-designated and amounts accumulated in other comprehensive income will be reclassified into earnings in the current period. Gains and losses on the derivative instrument representing hedge components excluded from the assessment of effectiveness are recognized immediately in earnings and are presented in the same financial statement line of the condensed consolidated statement of operations where the earnings effect of the hedged item is presented.

Other Hedges

Additionally, we enter into foreign exchange contracts to hedge monetary assets and liabilities that are denominated in currencies other than the functional currency of our subsidiaries. These foreign exchange contracts are carried at fair value and do not qualify for hedge accounting treatment and are not designated as hedging instruments. Changes in value of the derivative are recognized in other income (expense), net, in the condensed consolidated statement of operations in the current period, along with the offsetting foreign currency gain or loss on the underlying assets or liabilities.

Our use of derivative instruments exposes us to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. We do, however, seek to mitigate such risks by limiting our counterparties to major financial institutions that are selected based on their credit ratings and other factors. We have established policies and procedures for mitigating credit risk that include establishing counterparty credit limits, monitoring credit exposures, and continually assessing the creditworthiness of counterparties.

There were 201 and 64 open foreign exchange forward contracts designated as "cash flow hedges" and "not designated as hedging instruments," respectively, as of January 31, 2020. The aggregated notional amounts by currency and designation as of January 31, 2020 were as follows:



	Derivatives in Cash Flow Hedging Relationships			Derivatives Not Designated as Hedging Instruments
	Forward Contracts			Forward Contracts
Currency	Buy/(Sell)			Buy/(Sell)
	(in millions)
Euro	$	13		$	10
British Pound	—			(91		)
Singapore Dollar	15			8
Malaysian Ringgit	84			7
Japanese Yen	(88		)	(49		)
Other currencies	(19		)	(9		)
Total	$	5		$	(124	)

Derivative instruments are subject to master netting arrangements and are disclosed gross in the condensed consolidated balance sheet. The gross fair values and balance sheet presentation of derivative instruments held as of January 31, 2020 and October 31, 2019 were as follows:



Fair Values of Derivative Instruments
Derivative Assets					Derivative Liabilities
	Fair Value					Fair Value
Balance Sheet Location	January 31, 2020		October 31, 2019		Balance Sheet Location	January 31, 2020		October 31, 2019
	(in millions)					(in millions)
Derivatives designated as hedging instruments:
Cash flow hedges
Foreign exchange contracts
Other current assets	$	3	$	1	Other accrued liabilities	$	1	$	2
Derivatives not designated as hedging instruments:
Foreign exchange contracts
Other current assets	2		1		Other accrued liabilities	1		4
Total derivatives	$	5	$	2		$	2	$	6

The effect of derivative instruments for foreign exchange contracts designated as hedging instruments and for those not designated as hedging instruments in our condensed consolidated statement of operations was as follows:



	Three Months Ended
	January 31,
	2020			2019
	(in millions)
Derivatives designated as hedging instruments:
Cash Flow Hedges
Foreign exchange contracts:
Gain (loss) recognized in accumulated other comprehensive income (loss)	$	2		$	(2	)
Gain (loss) reclassified from accumulated other comprehensive income (loss) into earnings:
Cost of products	$	(1	)	$	—
Selling, general and administrative	$	—		$	(1	)
Gain (loss) excluded from effectiveness testing recognized in earnings based on changes in fair value:
Cost of products	$	1		$	1
Derivatives not designated as hedging instruments:
Gain (loss) recognized in other income (expense), net	$	—		$	(3	)

The estimated amount at January 31, 2020 expected to be reclassified from accumulated other comprehensive income (loss) to earnings within the next twelve months is a gain of $1 million.