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Hedging Activities | 3 Months Ended
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Sep. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Hedging Activities | Hedging Activities In the normal course of business, the Company is exposed to interest rate and foreign currency exchange rate fluctuations. At times, the Company limits these risks through the use of derivatives as described below. In accordance with the Company’s policy, derivatives are only used for hedging purposes. It does not use derivatives for trading or speculative purposes. The Company uses different counterparties for its derivative contracts to minimize the exposure to credit risk but does not anticipate non-performance by these parties. Foreign Currency Exchange Risk The Company conducts its business worldwide in U.S. dollars and the functional currencies of its foreign subsidiaries, including Euro, British pound sterling, and Canadian dollars. Changes in foreign currency exchange rates could have a material adverse impact on the Company’s financial results that are reported in U.S. dollars. The Company is also exposed to foreign currency exchange rate risk related to its foreign subsidiaries, including intercompany loans denominated in non-functional currencies. The Company has certain foreign currency exchange rate risk programs that use foreign currency forward contracts and cross-currency swaps. These forward contracts and cross-currency swaps are generally used to offset the potential income statement effects from intercompany loans and other obligations denominated in non-functional currencies. These programs reduce but do not entirely eliminate foreign currency exchange rate risk. Subsequent to the completion of the U.K. divestiture in April 2022 as discussed in Financial Note 2, “Business Acquisitions and Divestitures,” the Company’s foreign currency exchange rate risk is limited to the Euro and Canadian dollar. Non-Derivative Instruments Designated as Hedges At September 30, 2022 and March 31, 2022, the Company had €1.1 billion of Euro-denominated notes designated as non-derivative net investment hedges. These hedges are utilized to hedge portions of the Company’s net investments in non-U.S. subsidiaries against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar. For all notes that are designated as net investment hedges and meet effectiveness requirements, the changes in carrying value of the notes attributable to the change in spot rates are recorded as foreign currency translation adjustments in “Accumulated other comprehensive loss” in the Condensed Consolidated Statements of Stockholders’ Equity (Deficit) where they offset foreign currency translation gains and losses recorded on the Company’s net investments. To the extent foreign currency denominated notes designated as net investment hedges are ineffective, changes in carrying value attributable to the change in spot rates are recorded in earnings. In connection with the sale of the U.K. disposal group in April 2022, the Company reclassified $26 million of gains from accumulated other comprehensive loss and recorded in “Selling, distribution, general, and administrative expenses” in the Condensed Consolidated Statements of Operations for the six months ended September 30, 2022. This amount related to the Company’s £450 million British pound sterling-denominated notes, which were previously accounted for as net investment hedges until de-designated in fiscal 2020, and was included in the fiscal 2022 calculation of charges to remeasure the assets and liabilities to fair value less costs to sell. Foreign currency gains (losses) from non-derivative instruments included in other comprehensive income in the Condensed Consolidated Statements of Comprehensive Income were as follows:
| Three Months Ended September 30, |  | Six Months Ended September 30,
(In millions) | 2022 |  | 2021 |  | 2022 |  | 2021
Non-derivatives designated as net investment hedges: (1) |  |  |  |  |  |  |
Euro-denominated notes | $ | 75 |  |  | $ | 33 |  |  | $ | 139 |  |  | $ | 11 |
(1)There was no ineffectiveness in these hedges for the three and six months ended September 30, 2022 and 2021. Derivative Instruments At September 30, 2022 and March 31, 2022, the notional amounts of the Company’s outstanding derivatives were as follows:
|  |  |  |  | September 30, 2022 |  | March 31, 2022
(In millions) | Currency |  | Maturity Date |  | Notional
Derivatives designated as net investment hedges: (1) |  |  |  |  |  |  |
Cross-currency swaps (2) | CAD |  | Nov-24 |  | $ | 500 |  |  | $ | 500 |
Derivatives designated as fair value hedges: (1) |  |  |  |  |  |  |
Cross-currency swaps (3) | GBP |  | Feb-23 |  | £ | 450 |  |  | £ | 450 |
Floating interest rate swaps (4) | USD |  | Aug-27 to Sep-29 |  | $ | 750 |  |  | $ | — |
Derivatives designated as cash flow hedges: (1) |  |  |  |  |  |  |
Cross-currency swaps (2) | CAD |  | Jul-22 to Jan-24 |  | $ | 1,532 |  |  | $ | 1,678 |
Fixed interest rate swaps (5) | USD |  | Mar-23 |  | $ | 500 |  |  | $ | 500 |
(1)There was no ineffectiveness in these hedges for the three and six months ended September 30, 2022 and 2021. (2)The Company agreed with third parties to exchange fixed interest payments in one currency for fixed interest payments in another currency at specified intervals and to exchange principal in one currency for principal in another currency, calculated by reference to agreed-upon notional amounts. (3)The Company agreed with third parties to exchange fixed interest payments in British pound sterling for floating interest payments in U.S. dollars based on three-month LIBOR plus a spread. (4)The Company entered into fixed-to-floating interest rate swaps to hedge the changes in fair value caused by fluctuations in the benchmark interest rates. (5)The Company entered into agreements with financial institutions to lock into the fixed benchmark interest rates for future bond issuance. Net Investment Hedges The Company uses cross-currency swaps to hedge portions of the Company’s net investments denominated in Canadian dollars against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar. The changes in the fair value of these derivatives attributable to the changes in spot currency exchange rates and differences between spot and forward interest rates are recorded in accumulated other comprehensive loss and offset foreign currency translation gains and losses recorded on the Company’s net investments denominated in Canadian dollars. To the extent cross-currency swaps designated as hedges are ineffective, changes in carrying value attributable to the change in spot rates are recorded in earnings. Fair Value Hedges The Company uses cross-currency swaps to hedge the changes in the fair value of British pound sterling notes resulting from changes in benchmark interest rates and foreign exchange rates. The changes in the fair value of these derivatives and the offsetting changes in the fair value of the hedged notes are recorded in earnings. Gains from the changes in the Company’s fair value hedges recorded in earnings were largely offset by the losses recorded in earnings on the hedged item. During the three and six months ended September 30, 2022, the Company entered into floating interest rate swaps to convert $570 million and $750 million, respectively, of its fixed rate debt to floating interest rate in order to hedge the changes in fair value caused by fluctuations in the benchmark interest rate. The changes in the fair value of these derivatives are recorded in “Interest expense” in the Condensed Consolidated Statements of Operations. Cash Flow Hedges From time to time, the Company enters into cross-currency swaps to hedge intercompany loans denominated in non-functional currencies to reduce the income statement effects arising from fluctuations in foreign currency rates and also enters into forward contracts to hedge the variability future benchmark interest rates on planned bond issuances. The effective portion of changes in the fair value of these hedges is recorded in accumulated other comprehensive loss and reclassified into earnings in the same period in which the hedged transaction affects earnings. Changes in fair values representing hedge ineffectiveness are recognized in current earnings. Gains or losses reclassified from accumulated other comprehensive loss and recorded in “Selling, distribution, general, and administrative expenses” in the Condensed Consolidated Statements of Operations were not material for the three and six months ended September 30, 2022 and 2021. Derivatives Not Designated as Hedges Derivative instruments not designated as hedges are marked-to-market at the end of each accounting period with the change in fair value included in earnings. From time to time, the Company enters into forward contracts to hedge the Euro against cash flows denominated in British pound sterling and other European currencies. Changes in the fair values for contracts not designated as hedges are recorded directly into earnings in “Selling, distribution, general, and administrative expenses” in the Condensed Consolidated Statements of Operations. Changes in the fair values were not material for the three and six months ended September 30, 2021 and the Company did not have any outstanding derivative instruments not designated as hedges during fiscal 2023. Gains or losses from these contracts are largely offset by changes in the value of the underlying intercompany obligations. Other Information on Derivative Instruments Gains (losses) of derivatives included in other comprehensive income (loss) in the Condensed Consolidated Statements of Comprehensive Income were as follows:
| Three Months Ended September 30, |  | Six Months Ended September 30,
(In millions) | 2022 |  | 2021 |  | 2022 |  | 2021
Derivatives designated as net investment hedges: |  |  |  |  |  |  |
Cross-currency swaps | $ | 21 |  |  | $ | 10 |  |  | $ | 33 |  |  | $ | 5 |
Derivatives designated as cash flow hedges: |  |  |  |  |  |  |
Cross-currency swaps | $ | (3) |  |  | $ | 1 |  |  | $ | (5) |  |  | $ | (1) |
Fixed interest rate swaps | 28 |  |  | 10 |  |  | 55 |  |  | 12 |
Information regarding the fair value of derivatives on a gross basis were as follows:
| Balance Sheet Caption | September 30, 2022 |  | March 31, 2022
| Fair Value of Derivative |  | U.S. Dollar Notional |  | Fair Value of Derivative |  | U.S. Dollar Notional
(In millions) | Asset |  | Liability |  |  | Asset |  | Liability |
Derivatives designated for hedge accounting:
Cross-currency swaps (current) | Prepaid expenses and other/Other accrued liabilities | $ | 43 |  |  | $ | 62 |  |  | $ | 1,417 |  |  | $ | 30 |  |  | $ | 39 |  |  | $ | 1,537 |
Cross-currency swaps (non-current) | Other non-current assets/liabilities | 26 |  |  | — |  |  | 679 |  |  | — |  |  | 36 |  |  | 679 |
Fixed interest rate swaps (current) | Prepaid expenses and other | 85 |  |  | — |  |  | 500 |  |  | 31 |  |  | — |  |  | 500 |
Floating interest rate swaps (non-current) | Other non-current liabilities | — |  |  | 34 |  |  | 750 |  |  | — |  |  | — |  |  | — |
Total |  | $ | 154 |  |  | $ | 96 |  |  |  |  | $ | 61 |  |  | $ | 75 |  |  |
Refer to Financial Note 11, "Fair Value Measurements," for more information on these recurring fair value measurements.

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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 https://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 https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008 + Details
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