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DERIVATIVES (Notes) | 9 Months Ended
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Jul. 31, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVES | DERIVATIVES We are exposed to foreign currency exchange rate fluctuations and interest rate changes in the normal course of our business. As part of our risk management strategy, we use derivative instruments, primarily forward contracts and purchased options to hedge economic and/or accounting exposures resulting from changes in foreign currency exchange rates. Cash Flow Hedges We enter into foreign exchange contracts to hedge our forecasted operational cash flow exposures resulting from changes in foreign currency exchange rates. These foreign exchange contracts, carried at fair value, have maturities between one and twelve months. These derivative instruments are designated and qualify as cash flow hedges under the criteria prescribed in the authoritative guidance and are assessed for effectiveness against the underlying exposure every reporting period. For open contracts as of July 31, 2021, changes in the time value of the foreign exchange contract are excluded from the assessment of hedge effectiveness and are recognized in cost of sales over the life of the foreign exchange contract. The changes in fair value of the effective portion of the derivative instrument are recognized in accumulated other comprehensive income (loss). Amounts associated with cash flow hedges are reclassified to cost of sales in the condensed consolidated statement of operations when the forecasted transaction occurs. If it becomes probable that the forecasted transaction will not occur, the hedge relationship will be de-designated and amounts accumulated in other comprehensive income (loss) will be reclassified to other income (expense), net in the current period. Changes in the fair value of the ineffective portion of derivative instruments are recognized in other income (expense), net in the condensed consolidated statement of operations in the current period. We record the premium paid (time value) of an option on the date of purchase as an asset. For options designated as cash flow hedges, changes in the time value are excluded from the assessment of hedge effectiveness and are recognized in cost of sales over the life of the option contract. For the three and nine months ended July 31, 2021 and 2020, ineffectiveness and gains and losses recognized in other income (expense), net due to de-designation of cash flow hedge contracts were not significant. In July 2012, Agilent executed treasury lock agreements for $400 million in connection with future interest payments to be made on our 2022 senior notes issued on September 13, 2012. We designated the treasury lock as a cash flow hedge. The treasury lock contracts were terminated on September 10, 2012, and we recognized a deferred gain in accumulated other comprehensive income (loss) which is being amortized to interest expense over the life of the 2022 senior notes. On January 21, 2021 we redeemed $100 million of the $400 million aggregate principal amount of our 2022 senior notes. On April 5, 2021, we redeemed the remaining outstanding $300 million of our 2022 senior notes. We also recognized the remaining deferred gain on the terminated treasury lock related to the 2022 senior notes to other income (expense), net. For more information see Note 14, "Long-Term Debt". In February 2016, Agilent executed three forward-starting pay fixed/receive variable interest rate swaps for the notional amount of $300 million in connection with future interest payments to be made on our 2026 senior notes issued on September 15, 2016. These derivative instruments were designated and qualified as cash flow hedges under the criteria prescribed in the authoritative guidance. The swap arrangements were terminated on September 15, 2016 with a payment of $10 million, and we recognized this as a deferred loss in accumulated other comprehensive income (loss) which is being amortized to interest expense over the life of the 2026 senior notes. The remaining loss to be amortized related to the interest rate swap agreements at July 31, 2021 was $5 million. In August 2019, Agilent executed treasury lock agreements for $250 million in connection with future interest payments to be made on our 2029 senior notes issued on September 16, 2019. We designated the treasury lock as a cash flow hedge. The treasury lock contracts were terminated on September 6, 2019, and we recognized a deferred loss of $6 million in accumulated other comprehensive income (loss) which is being amortized to interest expense over the life of the 2029 senior notes. The remaining loss to be amortized related to the treasury lock agreements at July 31, 2021 was $5 million. Net Investment Hedges We enter into foreign exchange contracts to hedge net investments in foreign operations to mitigate the risk of adverse movements in exchange rates. These foreign exchange contracts are carried at fair value and are designated and qualify as net investment hedges under the criteria prescribed in the authoritative guidance. Changes in fair value of the effective portion of the derivative instrument are recognized in accumulated other comprehensive income (loss) and are assessed for effectiveness against the underlying exposure every reporting period. If the company’s net investment changes during the year, the hedge relationship will be assessed and de-designated if the hedge notional amount is outside of prescribed tolerance with a gain/loss reclassified from other comprehensive income (loss) to other income (expense) in the current period. As of July 31, 2021, we have 3 open forward contracts to sell euros to buy USD maturing in the fourth quarter of fiscal year 2021, and these are designated as a net investment hedge of the U.S. parent's interest in foreign subsidiaries denominated in euro functional currency. In the three and nine months ended July 31, 2021, the change in fair value of the net investment hedge resulted in a net gain of $1 million and a net loss of $2 million, respectively, recognized in accumulated other comprehensive income (loss) within foreign currency translation. For the three and nine months ended July 31, 2021, ineffectiveness and the resultant effect of any gains or losses recognized in other income (expense) due to de-designation of the hedge contracts were not significant. Other Hedges Additionally, we enter into foreign exchange contracts to hedge monetary assets and liabilities that are denominated in currencies other than the functional currency of our subsidiaries. These foreign exchange contracts are carried at fair value and do not qualify for hedge accounting treatment and are not designated as hedging instruments. Changes in value of the derivative instruments are recognized in other income (expense), net in the condensed consolidated statement of operations, in the current period, along with the offsetting foreign currency gain or loss on the underlying assets or liabilities. Our use of derivative instruments exposes us to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. We do, however, seek to mitigate such risks by limiting our counterparties to major financial institutions which are selected based on their credit ratings and other factors. We have established policies and procedures for mitigating credit risk that include establishing counterparty credit limits, monitoring credit exposures, and continually assessing the creditworthiness of counterparties. A number of our derivative agreements contain threshold limits to the net liability position with counterparties and are dependent on our corporate credit rating determined by the major credit rating agencies. The counterparties to the derivative instruments may request collateralization, in accordance with derivative agreements, on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position as of July 31, 2021, was $3 million. The credit-risk-related contingent features underlying these agreements had not been triggered as of July 31, 2021. There were 270 foreign exchange forward contracts open as of July 31, 2021 and designated as cash flow hedges. There were 183 foreign exchange forward contracts open as of July 31, 2021 and not designated as hedging instruments. There were 3 foreign exchange forward contracts open as of July 31, 2021 and designated as a net investment hedge. The aggregated notional amounts by currency and designation as of July 31, 2021 were as follows:
|  | Derivatives Designated as Cash Flow Hedges |  | Derivatives Designated as Net Investment Hedges |  | Derivatives Not Designated as Hedging Instruments
|  | Forward Contracts USD |  |  |  | Forward Contracts USD |  | Forward Contracts USD
Currency |  | Buy/(Sell) |  |  |  | Buy/(Sell) |  | Buy/(Sell)
|  | (in millions)
Euro |  | $ | (98) |  |  |  |  | $ | (95) |  |  | $ | 89 |
British Pound |  | (64) |  |  |  |  | — |  |  | (7) |
Canadian Dollar |  | (47) |  |  |  |  | — |  |  | (5) |
Japanese Yen |  | (103) |  |  |  |  | — |  |  | (23) |
Danish Krone |  | — |  |  |  |  | — |  |  | 27 |
Korean Won |  | (60) |  |  |  |  | — |  |  | (18) |
Singapore Dollar |  | 17 |  |  |  |  | — |  |  | 26 |
Swiss Franc |  | — |  |  |  |  | — |  |  | (4) |
Chinese Yuan Renminbi |  | (89) |  |  |  |  | — |  |  | (45) |
Swedish Krona |  | — |  |  |  |  | — |  |  | (2) |
Taiwan Dollar |  | — |  |  |  |  | — |  |  | (14) |
Indian Rupee |  | — |  |  |  |  | — |  |  | (5) |
Brazilian Real |  | — |  |  |  |  | — |  |  | (7) |
Thai Baht |  | — |  |  |  |  | — |  |  | (5) |
Other |  | 4 |  |  |  |  | — |  |  | (3) |
Totals |  | $ | (440) |  |  |  |  | $ | (95) |  |  | $ | 4 |
Derivative instruments are subject to master netting arrangements and are disclosed gross in the balance sheet in accordance with the authoritative guidance. The gross fair values and balance sheet location of derivative instruments held in the condensed consolidated balance sheet as of July 31, 2021 and October 31, 2020 were as follows:
Fair Values of Derivative Instruments
Asset Derivatives |  | Liability Derivatives
|  | Fair Value |  |  |  | Fair Value
Balance Sheet Location |  | July 31, 2021 |  | October 31, 2020 |  | Balance Sheet Location |  | July 31, 2021 |  | October 31, 2020
(in millions)
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |  |
Cash flow hedges |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  |  |  |  |  |  |  |  |  |
Other current assets |  | $ | 4 |  |  | $ | — |  |  | Other accrued liabilities |  | $ | 4 |  |  | $ | 12 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  |  |  |  |  |  |  |  |  |
Other current assets |  | $ | 1 |  |  | $ | 2 |  |  | Other accrued liabilities |  | $ | 2 |  |  | $ | 5 |
Total derivatives |  | $ | 5 |  |  | $ | 2 |  |  |  |  | $ | 6 |  |  | $ | 17 |
The effects of derivative instruments for foreign exchange contracts designated as hedging instruments and not designated as hedging instruments in our condensed consolidated statement of operations were as follows:
| Three Months Ended |  | Nine Months Ended
| July 31, |  | July 31,
| 2021 |  | 2020 |  | 2021 |  | 2020
| (in millions)
Derivatives designated as hedging instruments: |  |  |  |  |  |  |
Cash Flow Hedges |  |  |  |  |  |  |
Foreign exchange contracts: |  |  |  |  |  |  |
Gain (loss) recognized in accumulated other comprehensive loss | $ | 1 |  |  | $ | (9) |  |  | $ | (5) |  |  | $ | (6) |
Loss reclassified from accumulated other comprehensive loss into interest expense | $ | (1) |  |  | $ | — |  |  | $ | (1) |  |  | $ | (1) |
Gain (loss) reclassified from accumulated other comprehensive loss into cost of sales | $ | (4) |  |  | $ | 1 |  |  | $ | (18) |  |  | $ | 3 |
Gain (loss) on time value of forward contracts recorded in cost of sales | $ | (1) |  |  | $ | — |  |  | $ | (1) |  |  | $ | 2 |
Net Investment Hedges |  |  |  |  |  |  |
Foreign exchange contracts: |  |  |  |  |  |  |
Gain (loss) recognized in accumulated other comprehensive loss | $ | 1 |  |  | $ | (7) |  |  | $ | (2) |  |  | $ | (6) |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |
Gain (loss) recognized in other income (expense) | $ | (3) |  |  | $ | 9 |  |  | $ | (4) |  |  | $ | 6 |
At July 31, 2021, the amount of existing net loss that is expected to be reclassified from accumulated other comprehensive loss is $3 million of which zero is estimated to be reclassified to cost of sales within the next twelve months.

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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 http://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 http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
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