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Derivative Instruments | 3 Months Ended
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Apr. 30, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments | Derivative Instruments We conduct business on a global basis in multiple foreign currencies, subjecting Workday to foreign currency risk. To mitigate this risk, we utilize hedging contracts as described below. We do not enter into any derivatives for trading or speculative purposes. Our foreign currency contracts are classified within Level 2 of the fair value hierarchy because the valuation inputs are based on quoted prices and market observable data of similar instruments in active markets, such as currency spot and forward rates. Cash Flow Hedges We are exposed to foreign currency fluctuations resulting from customer contracts denominated in foreign currencies. We have a hedging program in which we enter into foreign currency forward contracts related to certain customer contracts. We designate these forward contracts as cash flow hedging instruments as the accounting criteria for such designation have been met. The effective portion of the gains or losses resulting from changes in the fair value of these hedges is recorded in Accumulated other comprehensive income (loss) ("OCI") on the condensed consolidated balance sheets and will be subsequently reclassified to the related revenue line item on the condensed consolidated statements of operations in the same period that the underlying revenues are earned. The changes in value of these contracts resulting from changes in forward points are excluded from the assessment of hedge effectiveness and are recorded as incurred in Other income (expense), net on the condensed consolidated statements of operations. Cash flows from such forward contracts are classified as operating activities. As of April 30, 2018 and January 31, 2018, we had outstanding foreign currency forward contracts designated as cash flow hedges with total notional values of $639 million and $549 million, respectively. All contracts have maturities not greater than 36 months. The notional value represents the amount that will be bought or sold upon maturity of the forward contract. Foreign Currency Forward Contracts not Designated as Hedges We also enter into foreign currency forward contracts to hedge a portion of our net outstanding monetary assets and liabilities. These forward contracts are not designated as hedging instruments under applicable accounting guidance, and therefore all changes in the fair value of the forward contracts are recorded in Other income (expense), net on the condensed consolidated statements of operations. These forward contracts are intended to offset the foreign currency gains or losses associated with the underlying monetary assets and liabilities. Cash flows from such forward contracts are classified as operating activities. As of April 30, 2018 and January 31, 2018, we had outstanding forward contracts with total notional values of $135 million and $75 million. The fair values of outstanding derivative instruments were as follows (in thousands):
|  | Condensed Consolidated Balance Sheets Location |  | April 30, 2018 |  | January 31, 2018
Derivative Assets: |  |  |  |  |  |
Foreign currency forward contracts designated as cash flow hedges |  | Prepaid expenses and other current assets |  | $ | 3,601 |  |  | $ | 15 |
Foreign currency forward contracts designated as cash flow hedges |  | Other assets |  | 2,318 |  |  | 4 |
Foreign currency forward contracts not designated as hedges |  | Prepaid expenses and other current assets |  | 565 |  |  | 79 |
Total Derivative Assets |  |  |  | $ | 6,484 |  |  | $ | 98 |
Derivative Liabilities: |  |  |  |  |  |
Foreign currency forward contracts designated as cash flow hedges |  | Accrued expenses and other current liabilities |  | $ | 6,090 |  |  | $ | 18,355 |
Foreign currency forward contracts designated as cash flow hedges |  | Other liabilities |  | 3,500 |  |  | 11,650 |
Foreign currency forward contracts not designated as hedges |  | Accrued expenses and other current liabilities |  | 1,345 |  |  | 2,805 |
Foreign currency forward contracts not designated as hedges |  | Other liabilities |  | 135 |  |  | 102 |
Total Derivative Liabilities |  |  |  | $ | 11,070 |  |  | $ | 32,912 |
Gains (losses) associated with foreign currency forward contracts designated as cash flow hedges were as follows (in thousands):
|  | Condensed Consolidated Statements of Operations and Statements of Comprehensive Loss Locations |  | Three Months Ended April 30,
|  |  | 2018 |  | 2017
Gains (losses) recognized in OCI (effective portion) (1) |  | Net change in market value of effective foreign currency forward exchange contracts |  | $ | 18,274 |  |  | $ | (975 | )
Gains (losses) reclassified from OCI into income (effective portion) |  | Revenues |  | (1,117 | ) |  | 234 |
Gains (losses) recognized in income (amount excluded from effectiveness testing and ineffective portion) |  | Other income (expense), net |  | 2,231 |  |  | 623 |
(1) | Of the total effective portion of foreign currency forward contracts designated as cash flow hedges as of April 30, 2018, net losses of $9 million are expected to be reclassified out of OCI within the next 12 months.
Gains (losses) associated with foreign currency forward contracts not designated as cash flow hedges were as follows (in thousands):
|  | Condensed Consolidated Statements of Operations Location |  | Three Months Ended April 30,
Derivative Type |  |  | 2018 |  | 2017
Foreign currency forward contracts not designated as hedges |  | Other income (expense), net |  | $ | 1,794 |  |  | $ | (6 | )
We are subject to master netting agreements with certain counterparties of the foreign exchange contracts, under which we are permitted to net settle transactions of the same currency with a single net amount payable by one party to the other. It is our policy to present the derivatives gross on the condensed consolidated balance sheets. Our foreign currency forward contracts are not subject to any credit contingent features or collateral requirements. We manage our exposure to counterparty risk by entering into contracts with a diversified group of major financial institutions and by actively monitoring outstanding positions. As of April 30, 2018, information related to these offsetting arrangements was as follows (in thousands):
|  | Gross Amounts of Recognized Assets |  | Gross Amounts Offset on the Condensed Consolidated Balance Sheets |  | Net Amounts of Assets Presented on the Condensed Consolidated Balance Sheets |  | Gross Amounts Not Offset on the Condensed Consolidated Balance Sheets |  | Net Assets Exposed
|  |  |  |  | Financial Instruments |  | Cash Collateral Received |
Derivative Assets: |  |  |  |  |  |  |  |  |  |  |  |
Counterparty A |  | $ | 2,222 |  |  | $ | — |  |  | $ | 2,222 |  |  | $ | (2,222 | ) |  | $ | — |  |  | $ | — |
Counterparty B |  | 2,958 |  |  | — |  |  | 2,958 |  |  | (2,958 | ) |  | — |  |  | — |
Counterparty C |  | 1,304 |  |  | — |  |  | 1,304 |  |  | (1,304 | ) |  | — |  |  | — |
Total |  | $ | 6,484 |  |  | $ | — |  |  | $ | 6,484 |  |  | $ | (6,484 | ) |  | $ | — |  |  | $ | — |
|  | Gross Amounts of Recognized Liabilities |  | Gross Amounts Offset on the Condensed Consolidated Balance Sheets |  | Net Amounts of Liabilities Presented on the Condensed Consolidated Balance Sheets |  | Gross Amounts Not Offset on the Condensed Consolidated Balance Sheets |  | Net Liabilities Exposed
|  |  |  |  | Financial Instruments |  | Cash Collateral Pledged |
Derivative Liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Counterparty A |  | $ | 2,939 |  |  | $ | — |  |  | $ | 2,939 |  |  | $ | (2,222 | ) |  | $ | — |  |  | $ | 717 |
Counterparty B |  | 6,365 |  |  | — |  |  | 6,365 |  |  | (2,958 | ) |  | — |  |  | 3,407 |
Counterparty C |  | 1,766 |  |  | — |  |  | 1,766 |  |  | (1,304 | ) |  | — |  |  | 462 |
Total |  | $ | 11,070 |  |  | $ | — |  |  | $ | 11,070 |  |  | $ | (6,484 | ) |  | $ | — |  |  | $ | 4,586 |

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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