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Hedging Activities | 3 Months Ended
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Jun. 30, 2023
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 Canadian dollars, Euro, and British pounds sterling. 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 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. Non-Derivative Instruments Designated as Hedges Prior to the divestiture of the E.U. disposal group, the Company had €1.1 billion of Euro-denominated notes designated as non-derivative net investment hedges. These hedges were 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 were designated as net investment hedges and met effectiveness requirements, the changes in carrying value of the notes attributable to the change in spot rates were recorded as foreign currency translation adjustments in “Accumulated other comprehensive loss” 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 were ineffective, changes in carrying value attributable to the change in spot rates were recorded in earnings. In connection with the divestiture of the E.U. disposal group in October 2022, the Euro-denominated notes described above were de-designated as net investment hedges. 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 to “Selling, distribution, general, and administrative expenses” in the Condensed Consolidated Statement of Operations for the three months ended June 30, 2022. This amount related to the Company’s £450 million of 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 of the disposal group 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 June 30,
(In millions) |  |  |  |  | 2023 |  | 2022
Non-derivatives designated as net investment hedges: (1) |  |  |  |  |  |  |
Euro-denominated notes |  |  |  |  | $ | — |  |  | $ | 64 |
(1)There was no ineffectiveness in these hedges for the three months ended June 30, 2022. Derivative Instruments At June 30, 2023 and March 31, 2023, the notional amounts of the Company’s outstanding derivatives were as follows:
|  |  |  |  | June 30, 2023 |  | March 31, 2023
(In millions) | Currency |  | Maturity Date (1) |  | Notional
Derivatives designated as net investment hedges: (2) |  |  |  |  |  |  |
Cross-currency swaps (3) | CAD |  | Nov-24 to Mar-25 |  | C$ | 1,500 |  |  | C$ | 1,500 |
Derivatives designated as fair value hedges: (2) |  |  |  |  |  |  |
Cross-currency swaps (4) | GBP |  | Nov-28 |  | £ | 450 |  |  | £ | 450 |
Cross-currency swaps (4) | EUR |  | Aug-25 to Jul-26 |  | € | 1,100 |  |  | € | 1,100 |
Floating interest rate swaps (5) | USD |  | Feb-26 to Sep-29 |  | $ | 1,250 |  |  | $ | 1,250 |
Derivatives designated as cash flow hedges: (2) |  |  |  |  |  |  |
Cross-currency swaps (3) | CAD |  | Jan-24 |  | C$ | 400 |  |  | C$ | 400 |
Fixed interest rate swaps (6) | USD |  | Jun-23 |  | $ | — |  |  | $ | 450 |
(1)The maturity date reflected is for outstanding derivatives as of June 30, 2023. (2)There was no ineffectiveness in these hedges for the three months ended June 30, 2023 and 2022. (3)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. (4)Represents cross-currency fixed-to-fixed interest rate swaps to mitigate the foreign currency exchange fluctuations on its foreign currency-denominated notes. (5)Represents fixed-to-floating interest rate swaps to hedge the changes in fair value caused by fluctuations in the benchmark interest rates. (6)The Company entered into agreements with financial institutions to lock into the fixed benchmark interest rates for future bond issuance, which were terminated during the first quarter of fiscal 2024 as discussed further below. 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 its foreign currency notes resulting from changes in benchmark interest rates and foreign currency 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. For components excluded from the assessment of hedge effectiveness, the initial value of the excluded component is recognized in accumulated other comprehensive loss and then released into earnings over the life of the hedging instrument. The difference between the change in the fair value of the excluded component and the amount amortized into earnings during the period is recorded in other comprehensive income (loss). 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 of 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 months ended June 30, 2023 and 2022. The Company entered into forward-starting fixed interest rate swaps designated as cash flow hedges in fiscal 2023 with a notional amount of $450 million, and in the first quarter of fiscal 2024 with a notional amount of $50 million, to hedge the variability of future benchmark interest rates on a planned bond issuance. On June 15, 2023, the Company completed a public offering of the 2033 Notes, at which point the $500 million cash flow hedges were terminated and the proceeds are amortized to interest expense over the life of the 2033 Notes, or 10 years. Refer to Financial Note 7, “Debt and Financing Activities,” for additional information on the public offering of the 2033 Notes. 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. 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. The Company did not have any outstanding derivative instruments not designated as hedges during the periods presented. Other Information on Derivative Instruments Gains (losses) from derivatives included in other comprehensive income in the Condensed Consolidated Statements of Comprehensive Income were as follows:
|  |  | Three Months Ended June 30,
(In millions) |  |  |  |  | 2023 |  | 2022
Derivatives designated as net investment hedges: |  |  |  |  |  |  |
Cross-currency swaps |  |  |  |  | $ | (20) |  |  | $ | 12 |
Derivatives designated as cash flow and other hedges: |  |  |  |  |  |  |
Cross-currency swaps (1) |  |  |  |  | $ | (6) |  |  | $ | (2) |
Fixed interest rate swaps |  |  |  |  | 16 |  |  | 27 |
(1)Includes other comprehensive income (loss) related to the excluded component of certain fair value hedges. Information regarding the fair value of derivatives on a gross basis were as follows:
| Balance Sheet Caption | June 30, 2023 |  | March 31, 2023
| 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 | $ | — |  |  | $ | 2 |  |  | $ | 301 |  |  | $ | 5 |  |  | $ | — |  |  | $ | 301 |
Cross-currency swaps (non-current) | Other non-current assets/liabilities | 84 |  |  | 12 |  |  | 2,760 |  |  | 74 |  |  | 2 |  |  | 2,760 |
Interest rate swaps (non-current) | Other non-current assets/liabilities | — |  |  | 39 |  |  | 1,250 |  |  | 1 |  |  | 15 |  |  | 1,700 |
Total |  | $ | 84 |  |  | $ | 53 |  |  |  |  | $ | 80 |  |  | $ | 17 |  |  |
Refer to Financial Note 9, "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://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
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