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Fair Value Measurements | 6 Months Ended
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Nov. 30, 2016
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 fair value of derivative contracts is determined using observable market inputs such as the daily market foreign currency rates, forward pricing curves, currency volatilities, currency correlations and interest rates and considers nonperformance risk of the Company and that of its counterparties. 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, 2016 and May 31, 2016, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement.
|  | As of November 30, 2016
(In millions) |  | Assets at Fair Value |  | Cash and Equivalents |  | Short-term Investments |  | Other Long-term Assets
Cash |  | $ | 681 |  |  | $ | 681 |  |  | $ | — |  |  | $ | — |
Level 1: |  |  |  |  |  |  |  |
U.S. Treasury securities |  | 1,256 |  |  | 350 |  |  | 906 |  |  | — |
Level 2: |  |  |  |  |  |  |  |
Time deposits |  | 820 |  |  | 781 |  |  | 39 |  |  | — |
U.S. Agency securities |  | 628 |  |  | 335 |  |  | 293 |  |  | — |
Commercial paper and bonds |  | 647 |  |  | 281 |  |  | 366 |  |  | — |
Money market funds |  | 1,911 |  |  | 1,911 |  |  | — |  |  | — |
Total Level 2: |  | 4,006 |  |  | 3,308 |  |  | 698 |  |  | — |
Level 3: |  |  |  |  |  |  |  |
Non-marketable preferred stock |  | 10 |  |  | — |  |  | — |  |  | 10 |
TOTAL |  | $ | 5,953 |  |  | $ | 4,339 |  |  | $ | 1,604 |  |  | $ | 10 |
|  | As of May 31, 2016
(In millions) |  | Assets at Fair Value |  | Cash and Equivalents |  | Short-term Investments |  | Other Long-term Assets
Cash |  | $ | 774 |  |  | $ | 774 |  |  | $ | — |  |  | $ | — |
Level 1: |  |  |  |  |  |  |  |
U.S. Treasury securities |  | 1,265 |  |  | 100 |  |  | 1,165 |  |  | — |
Level 2: |  |  |  |  |  |  |  |
Time deposits |  | 831 |  |  | 827 |  |  | 4 |  |  | — |
U.S. Agency securities |  | 679 |  |  | — |  |  | 679 |  |  | — |
Commercial paper and bonds |  | 733 |  |  | 262 |  |  | 471 |  |  | — |
Money market funds |  | 1,175 |  |  | 1,175 |  |  | — |  |  | — |
Total Level 2: |  | 3,418 |  |  | 2,264 |  |  | 1,154 |  |  | — |
Level 3: |  |  |  |  |  |  |  |
Non-marketable preferred stock |  | 10 |  |  | — |  |  | — |  |  | 10 |
TOTAL |  | $ | 5,467 |  |  | $ | 3,138 |  |  | $ | 2,319 |  |  | $ | 10 |
The Company elects to record the gross assets and liabilities of its derivative financial instruments on the Unaudited Condensed Consolidated Balance Sheets. 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. Any amounts of cash collateral received related to these instruments associated with the Company's credit-related contingent features are recorded in Cash and equivalents and Accrued liabilities, the latter of which would further offset against the Company’s derivative asset balance (refer to Note 9 — Risk Management and Derivatives). Any amounts of cash collateral posted related to these instruments associated with the Company's credit-related contingent features are recorded in Prepaid and other current assets, which would offset against the Company’s derivative liability balance (refer to Note 9 — Risk Management and Derivatives). Cash collateral received or posted related to the Company's credit-related contingent features is presented in the Cash provided by operations component of the Unaudited Condensed Consolidated Statements of Cash Flows. Any amounts of non-cash collateral received, such as securities, are not recorded on the Unaudited Condensed Consolidated Balance Sheets pursuant to U.S. GAAP. 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, 2016 and May 31, 2016, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement.
|  | As of November 30, 2016
|  | 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) |  | $ | 844 |  |  | $ | 657 |  |  | $ | 187 |  |  | $ | 92 |  |  | $ | 86 |  |  | $ | 6 |
Embedded derivatives |  | 10 |  |  | 4 |  |  | 6 |  |  | 9 |  |  | 2 |  |  | 7 |
TOTAL |  | $ | 854 |  |  | $ | 661 |  |  | $ | 193 |  |  | $ | 101 |  |  | $ | 88 |  |  | $ | 13 |
(1) | If the foreign exchange derivative instruments had been netted on the Unaudited Condensed Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $92 million as of November 30, 2016. As of that date, the Company had received $369 million of cash collateral from various counterparties related to these foreign exchange derivative instruments. No amount of collateral was posted on the Company's derivative liability balance as of November 30, 2016.
|  | As of May 31, 2016
|  | 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) |  | $ | 603 |  |  | $ | 487 |  |  | $ | 116 |  |  | $ | 145 |  |  | $ | 115 |  |  | $ | 30 |
Embedded derivatives |  | 7 |  |  | 2 |  |  | 5 |  |  | 9 |  |  | 2 |  |  | 7 |
Interest rate swaps(2) |  | 7 |  |  | 7 |  |  | — |  |  | 45 |  |  | 45 |  |  | — |
TOTAL |  | $ | 617 |  |  | $ | 496 |  |  | $ | 121 |  |  | $ | 199 |  |  | $ | 162 |  |  | $ | 37 |
(1) | If the foreign exchange derivative instruments had been netted on the Condensed Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $136 million as of May 31, 2016. As of that date, the Company had received $105 million of cash collateral from various counterparties related to these foreign exchange derivative instruments. No amount of collateral was posted on the Company’s derivative liability balance as of May 31, 2016.
(2) | As of May 31, 2016, no amount of cash collateral had been received or posted on the derivative asset or liability balance related to the Company's interest rate swaps.
Available-for-sale securities comprise investments in U.S. Treasury and Agency securities, time deposits, money market funds, corporate commercial paper and bonds. These securities are valued using market prices in both active markets (Level 1) and less active markets (Level 2). As of November 30, 2016, the Company held $1,369 million of available-for-sale securities with maturity dates within one year and $235 million with maturity dates over one year and less than five years within Short-term investments on the Unaudited Condensed Consolidated Balance Sheets. The gross realized gains and losses on sales of available-for-sale securities were immaterial for the three and six months ended November 30, 2016 and 2015. Unrealized gains and losses on available-for-sale securities included in Accumulated other comprehensive income were immaterial as of November 30, 2016 and May 31, 2016. The Company regularly reviews its available-for-sale securities for other-than-temporary impairment. For the six months ended November 30, 2016 and 2015, the Company did not consider any of its securities to be other-than-temporarily impaired and, accordingly, did not recognize any impairment losses. Included in Interest expense (income), net for the three months ended November 30, 2016 and 2015 was interest income related to the Company's available-for-sale securities of $5 million and $2 million, respectively, and $9 million and $4 million for the six months ended November 30, 2016 and 2015, 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, 2016 and the fiscal year ended May 31, 2016. No transfers among levels within the fair value hierarchy occurred during the six months ended November 30, 2016 and the fiscal year ended May 31, 2016. Derivative financial instruments include foreign exchange forwards and options, embedded derivatives and interest rate swaps. Refer to Note 9 — Risk Management and Derivatives for additional detail. As of November 30, 2016 and May 31, 2016, assets or liabilities that were required to be measured at fair value on a non-recurring basis were immaterial. Financial Assets and Liabilities Not Recorded at Fair Value For fair value information regarding Long-term debt, refer to Note 5 — Long-Term Debt. 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 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=66048111&loc=d3e19207-110258 Reference 2: 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 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 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13537-108611 Reference 5: 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=73719730&loc=d3e13504-108611 Reference 6: 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=73719730&loc=d3e13433-108611 + Details
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