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Derivative Financial Instruments | 9 Months Ended
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Sep. 02, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE FINANCIAL INSTRUMENTS | DERIVATIVE FINANCIAL INSTRUMENTS We may use derivatives to partially offset our business exposure to foreign currency and interest rate risk on expected future cash flows and certain existing assets and liabilities. We do not use any of our derivative instruments for trading purposes. We enter into master netting arrangements to mitigate credit risk in derivative transactions by permitting net settlement of transactions with the same counterparty. We do not offset fair value amounts recognized for derivative instruments under master netting arrangements. We also enter into collateral security agreements with certain of our counterparties to exchange cash collateral when the net fair value of certain derivative instruments fluctuates from contractually established thresholds. Collateral posted is included in prepaid expenses and other current assets and collateral received is included in accrued expenses on our condensed consolidated balance sheets. Cash Flow Hedges In countries outside the United States, we transact business in U.S. Dollars and in various other currencies. We may use foreign exchange option contracts or forward contracts to hedge a portion of our forecasted foreign currency denominated revenue. These foreign exchange contracts, carried at fair value, have maturities of up to 12 months. In June 2019, we entered into Treasury lock agreements with large financial institutions which fixed benchmark U.S. Treasury rates for an aggregate notional amount of $1 billion of our future debt issuance. These derivative instruments hedged the impact of changes in the benchmark interest rate to future interest payments and were settled upon debt issuance in the first quarter of fiscal 2020. We incurred a loss related to the settlement of the instruments which is amortized to interest expense over the term of our debt due February 1, 2030. See Note 14 for further details regarding our debt. As of September 2, 2022, we had net derivative gains on our foreign exchange option contracts expected to be recognized within the next 18 months, of which $165 million of gains are expected to be recognized into revenue within the next 12 months. In addition, we had net derivative losses on our Treasury lock agreements, of which $5 million is expected to be recognized into interest expense within the next 12 months. Non-Designated Hedges Our derivatives not designated as hedging instruments consist of foreign currency forward contracts that we primarily use to hedge monetary assets and liabilities denominated in non-functional currencies. The fair value of derivative instruments on our condensed consolidated balance sheets as of September 2, 2022 and December 3, 2021 were as follows:
(in millions) | 2022 |  | 2021
| Fair Value Asset Derivatives |  | Fair Value Liability Derivatives |  | Fair Value Asset Derivatives |  | Fair Value Liability Derivatives
Derivatives designated as hedging instruments: |  |  |  |  |  |  |
Foreign exchange option contracts(1) | $ | 179 |  |  | $ | — |  |  | $ | 91 |  |  | $ | — |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |
Foreign exchange forward contracts(1) | 4 |  |  | 9 |  |  | 7 |  |  | 8 |
Total derivatives | $ | 183 |  |  | $ | 9 |  |  | $ | 98 |  |  | $ | 8 |
_________________________________________ (1)Fair value asset derivatives are included in prepaid expenses and other current assets and fair value liability derivatives are included in accrued expenses on our condensed consolidated balance sheets. Gains and losses on derivative instruments, net of tax, recognized in our condensed consolidated statements of comprehensive income for the three and nine months ended September 2, 2022 and September 3, 2021 were associated with our foreign exchange option contracts. For the three and nine months ended September 2, 2022, we recognized $107 million and $193 million of net gains, respectively, in our condensed consolidated statements of comprehensive income. For the three and nine months ended September 3, 2021, net gains recognized in our condensed consolidated statements of comprehensive income were not material. The effects of derivative instruments on our condensed consolidated statements of income for the three and nine months ended September 2, 2022 and September 3, 2021 were primarily associated with foreign exchange option contracts. For the three and nine months ended September 2, 2022, we reclassified $54 million and $105 million of net gains, respectively, from accumulated other comprehensive income into revenue resulting from our foreign exchange option contracts. Comparatively, for the three and nine months ended September 3, 2021, we reclassified $5 million and $26 million of net losses, respectively, from accumulated other comprehensive income into revenue resulting from our foreign exchange option contracts.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
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