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DERIVATIVE FINANCIAL INSTRUMENTS | 12 Months Ended
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May 31, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE FINANCIAL INSTRUMENTS | 11. DERIVATIVE FINANCIAL INSTRUMENTS Fair Value Hedges—Interest Rate Swap Agreements In July 2014, we entered into certain interest rate swap agreements that have the economic effect of modifying the fixed-interest obligations associated with our October 2019 Notes and July 2021 Notes so that the interest payable on these senior notes effectively became variable based on LIBOR. In July 2013, we entered into certain interest rate swap agreements that have the economic effect of modifying the fixed-interest obligations associated with our January 2019 Notes so that the interest payable on these senior notes effectively became variable based on LIBOR. The critical terms of the interest rate swap agreements match the critical terms of the October 2019 Notes, July 2021 Notes and the January 2019 Notes that the interest rate swap agreements pertain to, including the notional amounts and maturity dates. We have designated the aforementioned interest rate swap agreements as qualifying hedging instruments and are accounting for them as fair value hedges pursuant to ASC 815. These transactions are characterized as fair value hedges for financial accounting purposes because they protect us against changes in the fair values of certain of our fixed-rate borrowings due to benchmark interest rate movements. The changes in fair values of these interest rate swap agreements are recognized as interest expense in our consolidated statements of operations with the corresponding amounts included in other assets or other non-current liabilities in our consolidated balance sheets. The amount of net gain (loss) attributable to the risk being hedged is recognized as interest expense in our consolidated statements of operations with the corresponding amount included in notes payable, non-current. The periodic interest settlements for the interest rate swap agreements for the October 2019 Notes, July 2021 Notes and the January 2019 Notes are recorded as interest expense and are included as a part of cash flows from operating activities. In July 2014, we settled the fixed to variable interest rate swap agreements associated with the July 2014 Notes. We do not use any interest rate swap agreements for trading purposes. Cash Flow Hedges—Cross-Currency Swap Agreements In connection with the issuance of our January 2021 Notes, we entered into certain cross-currency swap agreements to manage the related foreign currency exchange risk by effectively converting the fixed-rate, Euro-denominated January 2021 Notes, including the annual interest payments and the payment of principal at maturity, to fixed-rate, U.S. Dollar-denominated debt. The economic effect of the swap agreements was to eliminate the uncertainty of the cash flows in U.S. Dollars associated with the January 2021 Notes by fixing the principal amount of the January 2021 Notes at $1.6 billion with a fixed annual interest rate of 3.53%. We have designated these cross-currency swap agreements as qualifying hedging instruments and are accounting for these as cash flow hedges pursuant to ASC 815. The critical terms of the cross-currency swap agreements correspond to the January 2021 Notes, including the annual interest payments being hedged, and the cross-currency swap agreements mature at the same time as the January 2021 Notes. We used the hypothetical derivative method to measure the effectiveness of our cross-currency swap agreements. The fair values of these cross-currency swap agreements are recognized as other assets or other non-current liabilities in our consolidated balance sheets. The effective portions of the changes in fair values of these cross-currency swap agreements are reported in accumulated other comprehensive loss in our consolidated balance sheets, and an amount is reclassified out of accumulated other comprehensive loss into non-operating income (expense), net in the same period that the carrying value of the Euro-denominated January 2021 Notes is remeasured and the interest expense is recognized. The ineffective portion of the unrealized gains and losses on these cross-currency swaps, if any, is recorded immediately to non-operating income (expense), net. We evaluate the effectiveness of our cross-currency swap agreements on a quarterly basis. We did not record any ineffectiveness for fiscal 2016, 2015 or 2014. The cash flows related to the cross-currency swap agreements that pertain to the periodic interest settlements are classified as operating activities and the cash flows that pertain to the principal balance are classified as financing activities. We do not use any cross-currency swap agreements for trading purposes. Net Investment Hedge—Foreign Currency Borrowings In July 2013, we designated our July 2025 Notes as a net investment hedge of our investments in certain of our international subsidiaries that use the Euro as their functional currency in order to reduce the volatility in stockholders’ equity caused by the changes in foreign currency exchange rates of the Euro with respect to the U.S. Dollar. We used the spot method to measure the effectiveness of our net investment hedge. Under this method, for each reporting period, the change in the carrying value of the Euro-denominated July 2025 Notes due to remeasurement of the effective portion is reported in accumulated other comprehensive loss in our consolidated balance sheet and the remaining change in the carrying value of the ineffective portion, if any, is recognized in non-operating income (expense), net in our consolidated statements of operations. We evaluate the effectiveness of our net investment hedge at the beginning of every quarter. We did not record any ineffectiveness for fiscal 2016, 2015 or 2014. Foreign Currency Forward Contracts Not Designated as Hedges We transact business in various foreign currencies and have established a program that primarily utilizes foreign currency forward contracts to offset the risks associated with the effects of certain foreign currency exposures. Under this program, our strategy is to enter into foreign currency forward contracts so that increases or decreases in our foreign currency exposures are offset by gains or losses on the foreign currency forward contracts in order to mitigate the risks and volatility associated with our foreign currency transactions. We may suspend this program from time to time. Our foreign currency exposures typically arise from intercompany sublicense fees, intercompany loans and other intercompany transactions that are generally expected to be cash settled in the near term. Our foreign currency forward contracts are generally short-term in duration. Our ultimate realized gain or loss with respect to currency fluctuations will generally depend on the size and type of cross-currency exposures that we enter into, the currency exchange rates associated with these exposures and changes in those rates, the net realized and unrealized gains or losses on foreign currency forward contracts to offset these exposures and other factors. Neither do we use these foreign currency forward contracts for trading purposes nor do we designate these forward contracts as hedging instruments pursuant to ASC 815. Accordingly, we recorded the fair values of these contracts as of the end of our reporting period to our consolidated balance sheet with changes in fair values recorded to our consolidated statement of operations. The balance sheet classification for the fair values of these forward contracts is prepaid expenses and other current assets for forward contracts in an unrealized gain position and other current liabilities for forward contracts in an unrealized loss position. The statement of operations classification for changes in fair values of these forward contracts is non-operating income (expense), net, for both realized and unrealized gains and losses. As of May 31, 2016 and 2015, respectively, the notional amounts of the forward contracts we held to purchase U.S. Dollars in exchange for other major international currencies were $2.7 billion and $2.2 billion, respectively, and the notional amounts of forward contracts we held to sell U.S. Dollars in exchange for other major international currencies were $2.0 billion and $1.2 billion, respectively. The fair values of our outstanding foreign currency forward contracts were nominal at May 31, 2016 and 2015. Included in our non-operating income (expense), net were $97 million, $60 million and $(69) million of net gains (losses) related to these forward contracts for the years ended May 31, 2016, 2015 and 2014, respectively. The cash flows related to these foreign currency contracts are classified as operating activities. The effects of derivative and non-derivative instruments designated as hedges on certain of our consolidated financial statements were as follows as of or for each of the respective periods presented below (amounts presented exclude any income tax effects): Fair Values of Derivative and Non-Derivative Instruments Designated as Hedges in Consolidated Balance Sheets
|  |  |  | Fair Value as of May 31,
(in millions) |  | Balance Sheet Location |  | 2016 |  | 2015
Interest rate swap agreements designated as fair value hedges |  | Other assets |  | $ | 122 |  | $ | 74
Cross-currency swap agreements designated as cash flow hedges |  | Other non-current liabilities |  | $ | (218) |  | $ | (244)
Foreign currency borrowings designated as net investment hedge |  | Notes payable, non-current |  | $ | (991) |  | $ | (981)
Effects of Derivative and Non-Derivative Instruments Designated as Hedges on Income and Other Comprehensive Income (OCI) or Loss (OCL)
|  | Amount of Gain (Loss) Recognized in Accumulated OCI or OCL (Effective Portion) |  | Location and Amount of Gain (Loss) Reclassified from Accumulated OCI or OCL into Income (Effective Portion)
|  | Year Ended May 31, |  |  |  | Year Ended May 31,
(in millions) |  | 2016 |  | 2015 |  |  |  | 2016 |  | 2015
Cross-currency swap agreements |  | $ | 26 |  | $ | (318) |  | Non-operating income (expense), net |  | $ | 41 |  | $ | (348)
designated as cash flow hedges
Foreign currency borrowings designated |  |  |  |  |  |  |  |  |  |  |  |  |  |
as net investment hedge |  | $ | (25) |  | $ | 208 |  | Not applicable |  | $ | — |  | $ | —
|  | Location and Amount of Gain Recognized in Income on Derivative |  | Location and Amount of Loss on Hedged Item Recognized in Income Attributable to Risk Being Hedged
|  |  | Year Ended May 31, |  |  | Year Ended May 31,
(in millions) |  |  | 2016 |  | 2015 |  |  | 2016 |  | 2015
Interest rate swap agreements designated as fair value hedges |  | Interest expense | $ | 48 |  | $ | 51 |  | Interest expense | $ | (48) |  | $ | (51)

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