XML 29 R17.htm IDEA: XBRL DOCUMENT
v3.24.2.u1

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | 6 Months Ended
--- | ---
Aug. 02, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES As part of its risk management strategy, the Company uses derivative instruments, primarily foreign currency forward and option contracts and interest rate swaps, to hedge certain foreign currency and interest rate exposures, respectively. The Company’s objective is to offset gains and losses resulting from these exposures with gains and losses on the derivative contracts used to hedge the exposures, thereby reducing volatility of earnings and protecting the fair values of assets and liabilities. The earnings effects of the derivative instruments are presented in the same line items on the Condensed Consolidated Statements of Income as the earnings effects of the hedged items. For derivatives designated as cash flow hedges, the Company assesses hedge effectiveness both at the onset of the hedge and at regular intervals throughout the life of the instruments. For derivatives designated as fair value hedges, the Company assesses hedge effectiveness on qualifying instruments using the shortcut method whereby the hedges are considered perfectly effective at the onset of the hedge and over the life of the hedging relationship. Foreign Exchange Risk The Company uses foreign currency forward and option contracts designated as cash flow hedges to protect against the foreign currency exchange rate risks inherent in its forecasted transactions denominated in currencies other than the U.S. Dollar. Hedge accounting is applied based upon the criteria established by accounting guidance for derivative instruments and hedging activities. The risk of loss associated with purchased options is limited to premium amounts paid for the option contracts. The risk of loss associated with forward contracts is equal to the exchange rate differential from the time the contract is entered into until the time it is settled. The majority of these contracts typically expire in twelve months or less. During the three and six months ended August 2, 2024 and August 4, 2023, the Company did not discontinue any cash flow hedges related to foreign exchange contracts that had a material impact on the Company’s results of operations due to the probability that the forecasted cash flows would not occur. The Company uses forward contracts to hedge monetary assets and liabilities denominated in a foreign currency. These contracts generally expire in three months or less, are considered economic hedges, and are not designated for hedge accounting. The change in the fair value of these instruments represents a natural hedge as their gains and losses offset the changes in the underlying fair value of the monetary assets and liabilities due to movements in currency exchange rates. In connection with DFS operations in Europe, forward contracts are used to hedge financing receivables denominated in foreign currencies other than Euro. These contracts are not designated for hedge accounting and most expire within three years or less. Interest Rate Risk The Company uses interest rate swaps to hedge the variability in cash flows related to the interest rate payments on structured financing debt. The interest rate swaps economically convert the variable rate on the structured financing debt to a fixed interest rate to match the underlying fixed rate being received on fixed-term customer leases and loans. These contracts are not designated for hedge accounting and most expire within four years or less. Interest rate swaps are utilized to manage the interest rate risk, at a portfolio level, associated with DFS operations in Europe. The interest rate swaps economically convert the fixed rate on financing receivables to a three-month Euribor floating rate in order to match the floating rate nature of the banks’ funding pool. The Company also uses interest rate swaps to manage the cash flows related to interest payments on senior unsecured eurobonds. The interest rate swaps economically convert the fixed rate on the Company’s bonds to a floating rate to match the underlying lease repayments profile. These contracts are not designated for hedge accounting and most expire within five years or less. See Note 4 of the Notes to the Condensed Consolidated Financial Statements for more information about the Dell Bank senior unsecured eurobonds. The Company utilizes cross-currency amortizing swaps to hedge the currency and interest rate risk exposure associated with the European securitization program. The cross-currency swaps combine a Euro-based interest rate swap with a British Pound or U.S. Dollar foreign exchange forward contract in which the Company pays a fixed or floating British Pound or U.S. Dollar amount and receives a fixed or floating amount in Euros linked to the one-month Euribor rate. The notional value of the swaps amortizes in line with the expected cash flows and run-off of the securitized assets. The swaps are not designated for hedge accounting and expire within five years or less. Derivative Instruments The following table presents the notional amounts of outstanding derivative instruments as of the dates indicated:
| August 2, 2024 |  | February 2, 2024
| (in millions)
Foreign exchange contracts: |  |  |
Designated as cash flow hedging instruments | $ | 7,345 |  |  | $ | 6,339 |
Non-designated as hedging instruments | 5,982 |  |  | 5,844 |
Total | $ | 13,327 |  |  | $ | 12,183 |
Interest rate contracts: |  |  |
Non-designated as hedging instruments | $ | 6,564 |  |  | $ | 6,551 |
The following table presents the effect of derivative instruments designated as cash flow hedging instruments on the Condensed Consolidated Statements of Financial Position and the Condensed Consolidated Statements of Income for the periods indicated:
Derivatives in Cash Flow Hedging Relationships |  | Gain (Loss) Recognized in Accumulated OCI, Net of Tax, on Derivatives |  | Location of Gain (Loss) Reclassified from Accumulated OCI into Income |  | Gain (Loss) Reclassified from Accumulated OCI into Income
|  | (in millions) |  |  |  | (in millions)
For the three months ended August 2, 2024:
|  |  |  | Total net revenue |  | $ | 14 |
Foreign exchange contracts |  | $ | (20) |  |  | Total cost of net revenue |  | 4 |
Total |  | $ | (20) |  |  | Total |  | $ | 18 |
For the three months ended August 4, 2023:
|  |  |  | Total net revenue |  | $ | (63) |
Foreign exchange contracts |  | $ | 49 |  |  | Total cost of net revenue |  | (5) |
Total |  | $ | 49 |  |  | Total |  | $ | (68) |
For the six months ended August 2, 2024:
|  |  |  | Total net revenue |  | $ | 32 |
Foreign exchange contracts |  | $ | 67 |  |  | Total cost of net revenue |  | 5 |
Total |  | $ | 67 |  |  | Total |  | $ | 37 |
For the six months ended August 4, 2023:
|  |  |  | Total net revenue |  | $ | (151) |
Foreign exchange contracts |  | $ | 59 |  |  | Total cost of net revenue |  | (8) |
Total |  | $ | 59 |  |  | Total |  | $ | (159) |
The following table presents the effect of derivative instruments not designated as hedging instruments on the Condensed Consolidated Statements of Income for the periods indicated:
| Three Months Ended |  | Six Months Ended |  |  |  |
| August 2, 2024 |  | August 4, 2023 |  | August 2, 2024 |  | August 4, 2023 |  |  |  | Location of Gain (Loss) Recognized
| (in millions) |  |
Foreign exchange contracts | $ | (26) |  |  | $ | (40) |  |  | $ | (45) |  |  | $ | 17 |  |  |  |  | Interest and other, net
Interest rate contracts | 28 |  |  | 24 |  |  | (11) |  |  | 3 |  |  |  |  | Interest and other, net
Total | $ | 2 |  |  | $ | (16) |  |  | $ | (56) |  |  | $ | 20 |  |  |  |  |
The Company presents its derivative instruments on a net basis in the Condensed Consolidated Statements of Financial Position due to the right of offset by its counterparties under master netting arrangements. The following tables present the fair value of those derivative instruments presented on a gross basis as of the dates indicated:
| August 2, 2024
| Other Current Assets |  | Other Non-Current Assets |  | Other Current Liabilities |  | Other Non-Current Liabilities |  | Total Fair Value
| (in millions)
Derivatives designated as hedging instruments:
Foreign exchange contracts in an asset position | $ | 78 |  |  | $ | — |  |  | $ | 15 |  |  | $ | — |  |  | $ | 93 |
Foreign exchange contracts in a liability position | (14) |  |  | — |  |  | (14) |  |  | — |  |  | (28) |
Net asset (liability) | 64 |  |  | — |  |  | 1 |  |  | — |  |  | 65 |
Derivatives not designated as hedging instruments:
Foreign exchange contracts in an asset position | 156 |  |  | — |  |  | 42 |  |  | — |  |  | 198 |
Foreign exchange contracts in a liability position | (91) |  |  | — |  |  | (60) |  |  | — |  |  | (151) |
Interest rate contracts in an asset position | 1 |  |  | 29 |  |  | — |  |  | — |  |  | 30 |
Interest rate contracts in a liability position | — |  |  | — |  |  | (1) |  |  | (53) |  |  | (54) |
Net asset (liability) | 66 |  |  | 29 |  |  | (19) |  |  | (53) |  |  | 23 |
Total derivatives at fair value | $ | 130 |  |  | $ | 29 |  |  | $ | (18) |  |  | $ | (53) |  |  | $ | 88 |
| February 2, 2024
| Other Current Assets |  | Other Non-Current Assets |  | Other Current Liabilities |  | Other Non-Current Liabilities |  | Total Fair Value
| (in millions)
Derivatives designated as hedging instruments:
Foreign exchange contracts in an asset position | $ | 44 |  |  | $ | — |  |  | $ | 19 |  |  | $ | — |  |  | $ | 63 |
Foreign exchange contracts in a liability position | (5) |  |  | — |  |  | (15) |  |  | — |  |  | (20) |
Net asset (liability) | 39 |  |  | — |  |  | 4 |  |  | — |  |  | 43 |
Derivatives not designated as hedging instruments:
Foreign exchange contracts in an asset position | 90 |  |  | — |  |  | 71 |  |  | — |  |  | 161 |
Foreign exchange contracts in a liability position | (68) |  |  | — |  |  | (121) |  |  | — |  |  | (189) |
Interest rate contracts in an asset position | 3 |  |  | 40 |  |  | — |  |  | — |  |  | 43 |
Interest rate contracts in a liability position | — |  |  | — |  |  | (10) |  |  | (28) |  |  | (38) |
Net asset (liability) | 25 |  |  | 40 |  |  | (60) |  |  | (28) |  |  | (23) |
Total derivatives at fair value | $ | 64 |  |  | $ | 40 |  |  | $ | (56) |  |  | $ | (28) |  |  | $ | 20 |
The following tables present the gross amounts of the Company’s derivative instruments, amounts offset due to master netting agreements with the Company’s counterparties, and the net amounts recognized in the Condensed Consolidated Statements of Financial Position as of the dates indicated:
| August 2, 2024
| Gross Amounts of Recognized Assets/ (Liabilities) |  | Gross Amounts Offset in the Statement of Financial Position |  | Net Amounts of Assets/(Liabilities) Presented in the Statement of Financial Position |  | Gross Amounts not Offset in the Statement of Financial Position |  | Net Amount of Assets/ (Liabilities) Recognized in the Statement of Financial Position
| Financial Instruments |  | Cash Collateral Received or Pledged |
| (in millions)
Derivative instruments: |  |  |  |  |  |  |  |  |  |  |
Financial assets | $ | 321 |  |  | $ | (162) |  |  | $ | 159 |  |  | $ | — |  |  | $ | (45) |  |  | $ | 114 |
Financial liabilities | (233) |  |  | 162 |  |  | (71) |  |  | — |  |  | 4 |  |  | (67) |
Total derivative instruments | $ | 88 |  |  | $ | — |  |  | $ | 88 |  |  | $ | — |  |  | $ | (41) |  |  | $ | 47 |
| February 2, 2024
| Gross Amounts of Recognized Assets/ (Liabilities) |  | Gross Amounts Offset in the Statement of Financial Position |  | Net Amounts of Assets/(Liabilities) Presented in the Statement of Financial Position |  | Gross Amounts not Offset in the Statement of Financial Position |  | Net Amount of Assets/ (Liabilities) Recognized in the Statement of Financial Position
| Financial Instruments |  | Cash Collateral Received or Pledged |
| (in millions)
Derivative instruments: |  |  |  |  |  |  |  |  |  |  |
Financial assets | $ | 267 |  |  | $ | (163) |  |  | $ | 104 |  |  | $ | — |  |  | $ | (24) |  |  | $ | 80 |
Financial liabilities | (247) |  |  | 163 |  |  | (84) |  |  | — |  |  | 9 |  |  | (75) |
Total derivative instruments | $ | 20 |  |  | $ | — |  |  | $ | 20 |  |  | $ | — |  |  | $ | (15) |  |  | $ | 5 |

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration