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Fair Value Measurements | 6 Months Ended
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Nov. 30, 2014
Fair Value Disclosures [Abstract] |
Fair Value Measurements |
NOTE 4 — Fair Value Measurements
The Company measures certain financial assets and liabilities at fair value on a recurring basis, including derivatives and available-for-sale securities. Fair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. The Company uses the three-level hierarchy established by the FASB that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach and cost approach). The levels of the fair value hierarchy are described below:
• | Level 1: Quoted prices in active markets for identical assets or liabilities.
• | Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical assets or liabilities in markets that are not active.
• | Level 3: Unobservable inputs for which there is little or no market data available, which require the reporting entity to develop its own assumptions.
The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Financial assets and liabilities are classified in their entirety based on the most conservative level of input that is significant to the fair value measurement. Pricing vendors are utilized for certain Level 1 and Level 2 investments. These vendors either provide a quoted market price in an active market or use observable inputs without applying significant adjustments in their pricing. Observable inputs include broker quotes, interest rates and yield curves observable at commonly quoted intervals, volatilities and credit risks. The Company’s fair value processes include controls that are designed to ensure appropriate fair values are recorded. These controls include a comparison of fair values to another independent pricing vendor. The following tables present information about the Company’s financial assets measured at fair value on a recurring basis as of November 30, 2014 and May 31, 2014, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement.
| As of November 30, 2014
(In millions) |  | Assets at Fair Value |  | Cash and Cash Equivalents |  | Short-term Investments |  | Other Long-term Assets
Cash |  | $ | 780 |  |  | $ | 780 |  |  | $ | — |  |  | $ | — |
Level 1: |  |  |  |  |  |  |  |
U.S. Treasury securities |  | 873 |  |  | 25 |  |  | 848 |  |  | — |
Level 2: |  |  |  |  |  |  |  |
Time deposits |  | 302 |  |  | 302 |  |  | — |  |  | — |
U.S. Agency securities |  | 788 |  |  | — |  |  | 788 |  |  | — |
Commercial paper and bonds |  | 854 |  |  | 50 |  |  | 804 |  |  | — |
Money market funds |  | 1,116 |  |  | 1,116 |  |  | — |  |  | — |
Total Level 2: |  | 3,060 |  |  | 1,468 |  |  | 1,592 |  |  | — |
Level 3: |  |  |  |  |  |  |  |
Non-marketable preferred stock |  | 6 |  |  | — |  |  | — |  |  | 6 |
TOTAL |  | $ | 4,719 |  |  | $ | 2,273 |  |  | $ | 2,440 |  |  | $ | 6 |
| As of May 31, 2014
(In millions) |  | Assets at Fair Value |  | Cash and Cash Equivalents |  | Short-term Investments |  | Other Long-term Assets
Cash |  | $ | 780 |  |  | $ | 780 |  |  | $ | — |  |  | $ | — |
Level 1: |  |  |  |  |  |  |  |
U.S. Treasury securities |  | 1,137 |  |  | 151 |  |  | 986 |  |  | — |
Level 2: |  |  |  |  |  |  |  |
Time deposits |  | 227 |  |  | 227 |  |  | — |  |  | — |
U.S. Agency securities |  | 1,027 |  |  | 25 |  |  | 1,002 |  |  | — |
Commercial paper and bonds |  | 959 |  |  | 25 |  |  | 934 |  |  | — |
Money market funds |  | 1,012 |  |  | 1,012 |  |  | — |  |  | — |
Total Level 2: |  | 3,225 |  |  | 1,289 |  |  | 1,936 |  |  | — |
Level 3: |  |  |  |  |  |  |  |
Non-marketable preferred stock |  | 7 |  |  | — |  |  | — |  |  | 7 |
TOTAL |  | $ | 5,149 |  |  | $ | 2,220 |  |  | $ | 2,922 |  |  | $ | 7 |
The following tables present information about the Company’s derivative assets and liabilities measured at fair value on a recurring basis as of November 30, 2014 and May 31, 2014, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement.
| As of November 30, 2014
|  | Derivative Assets |  | Derivative Liabilities
(In millions) |  | Assets at Fair Value |  | Other Current Assets |  | Other Long-term Assets |  | Liabilities at Fair Value |  | Accrued Liabilities |  | Other Long-term Liabilities
Level 2: |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange forwards and options(1) |  | $ | 635 |  |  | $ | 465 |  |  | $ | 170 |  |  | $ | 58 |  |  | $ | 55 |  |  | $ | 3 |
Embedded derivatives |  | 1 |  |  | 1 |  |  | — |  |  | — |  |  | — |  |  | — |
Interest rate swap contracts |  | 4 |  |  | 4 |  |  | — |  |  | — |  |  | — |  |  | — |
TOTAL |  | $ | 640 |  |  | $ | 470 |  |  | $ | 170 |  |  | $ | 58 |  |  | $ | 55 |  |  | $ | 3 |
(1) | The Company’s derivative financial instruments are subject to master netting arrangements that allow for the offset of assets and liabilities in the event of default or early termination of the contract. The Company elects to record the gross assets and liabilities of its derivative financial instruments on the Unaudited Condensed Consolidated Balance Sheets. If the derivative financial instruments had been netted on the Unaudited Condensed Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $58 million. At November 30, 2014, the Company had received from various counterparties $170 million of cash collateral; this amount has been recorded in Cash and equivalents and Accrued liabilities, the latter of which would also net against the Company's derivative asset balance. No amount of collateral was posted on the Company’s derivative liability balance.
| As of May 31, 2014
|  | Derivative Assets |  | Derivative Liabilities
(In millions) |  | Assets at Fair Value |  | Other Current Assets |  | Other Long-term Assets |  | Liabilities at Fair Value |  | Accrued Liabilities |  | Other Long-term Liabilities
Level 2: |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange forwards and options(1) |  | $ | 127 |  |  | $ | 101 |  |  | $ | 26 |  |  | $ | 85 |  |  | $ | 84 |  |  | $ | 1 |
Interest rate swap contracts |  | 6 |  |  | — |  |  | 6 |  |  | — |  |  | — |  |  | — |
TOTAL |  | $ | 133 |  |  | $ | 101 |  |  | $ | 32 |  |  | $ | 85 |  |  | $ | 84 |  |  | $ | 1 |
(1) | The Company’s derivative financial instruments are subject to master netting arrangements that allow for the offset of assets and liabilities in the event of default or early termination of the contract. The Company elects to record the gross assets and liabilities of its derivative financial instruments on the Consolidated Balance Sheets. If the derivative financial instruments had been netted on the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $63 million. No amounts of collateral were received or posted on the Company’s derivative assets and liabilities as of May 31, 2014.
Available-for-sale securities comprise investments in U.S. Treasury and Agency securities, money market funds, corporate commercial paper and bonds. These securities are valued using market prices on both active markets (Level 1) and less active markets (Level 2). The gross realized gains and losses on sales of available-for-sale securities were immaterial for the three and six months ended November 30, 2014 and 2013. Unrealized gains and losses on available-for-sale securities included in Other comprehensive income were immaterial as of November 30, 2014 and May 31, 2014. The Company regularly reviews its available-for-sale securities for other-than-temporary impairment. For the six months ended November 30, 2014 the Company did not consider any of its securities to be other-than-temporarily impaired and accordingly, did not recognize any impairment losses. As of November 30, 2014, the Company held $1,857 million of available-for-sale securities with maturity dates within one year from the purchase date and $583 million with maturity dates over one year and less than five years from the purchase date within Short-term investments. As of May 31, 2014, the Company held $2,287 million of available-for-sale securities with maturity dates within one year from purchase date and $635 million with maturity dates over one year and less than five years from purchase date within Short-term investments. Included in Interest expense (income), net for each of the three months ended November 30, 2014 and 2013 was interest income related to the Company's available-for-sale securities of $2 million and $1 million, respectively, and $3 million and $2 million for each of the six months ended November 30, 2014 and 2013, respectively. The Company’s Level 3 assets comprise investments in certain non-marketable preferred stock. These Level 3 investments are an immaterial portion of the Company's portfolio. Changes in Level 3 investment assets were immaterial during the six months ended November 30, 2014 and the year ended May 31, 2014. Derivative financial instruments include foreign exchange forwards and options, embedded derivatives and interest rate swap contracts. Refer to Note 8 — Risk Management and Derivatives for additional detail. No transfers among the levels within the fair value hierarchy occurred during the six months ended November 30, 2014. As of November 30, 2014 and May 31, 2014, the Company had no assets or liabilities that were required to be measured at fair value on a non-recurring basis. Financial Assets and Liabilities Not Recorded at Fair Value The Company’s long-term debt is recorded at adjusted cost, net of amortized premiums and discounts and interest rate swap fair value adjustments. The fair value of long-term debt is estimated based upon quoted prices for similar instruments or quoted prices for identical instruments in inactive markets (Level 2). The fair value of the Company’s long-term debt, including the current portion, was approximately $1,179 million at November 30, 2014 and $1,154 million at May 31, 2014. The carrying amounts reflected on the Unaudited Condensed Consolidated Balance Sheets for Notes payable approximate fair value.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13537-108611 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13433-108611 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=25499696&loc=d3e19207-110258 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13504-108611 + Details
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