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Financial Instruments | 6 Months Ended
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Apr. 30, 2021
Investments, All Other Investments [Abstract] |
Financial Instruments | Financial Instruments Cash Equivalents and Available-for-Sale Investments
| As of April 30, 2021 |  | As of October 31, 2020
| Cost |  | Gross Unrealized Gain |  | Gross Unrealized Loss |  | Fair Value |  | Cost |  | Gross Unrealized Gain |  | Gross Unrealized Loss |  | Fair Value
| In millions
Cash Equivalents: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate debt | $ | 1,374 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,374 |  |  | $ | 1,700 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,700 |
Financial institution instruments | — |  |  | — |  |  | — |  |  | — |  |  | 59 |  |  | — |  |  | — |  |  | 59 |
Government debt | 931 |  |  | — |  |  | — |  |  | 931 |  |  | 2,173 |  |  | — |  |  | — |  |  | 2,173 |
Total cash equivalents | 2,305 |  |  | — |  |  | — |  |  | 2,305 |  |  | 3,932 |  |  | — |  |  | — |  |  | 3,932 |
Available-for-Sale Investments: |  |  |  |  |  |  |  |  |  |
Corporate debt(1) | — |  |  | — |  |  | — |  |  | — |  |  | 169 |  |  | — |  |  | — |  |  | 169 |
Financial institution instruments(1) | 12 |  |  | — |  |  | — |  |  | 12 |  |  | 32 |  |  | — |  |  | — |  |  | 32 |
Government debt(1) | — |  |  | — |  |  | — |  |  | — |  |  | 73 |  |  | — |  |  | — |  |  | 73 |
Mutual funds | 44 |  |  | 19 |  |  | — |  |  | 63 |  |  | 42 |  |  | 16 |  |  | — |  |  | 58 |
Total available-for-sale investments | 56 |  |  | 19 |  |  | — |  |  | 75 |  |  | 316 |  |  | 16 |  |  | — |  |  | 332 |
Total cash equivalents and available-for-sale investments | $ | 2,361 |  |  | $ | 19 |  |  | $ | — |  |  | $ | 2,380 |  |  | $ | 4,248 |  |  | $ | 16 |  |  | $ | — |  |  | $ | 4,264 |
(1) HP classifies its marketable debt securities as Available-for-sale investments within Other current assets on the Consolidated Condensed Balance Sheets, including those with maturity dates beyond one year, based on their highly liquid nature and availability for use in current operations. All highly liquid investments with original maturities of three months or less at the date of acquisition are considered cash equivalents. As of April 30, 2021 and October 31, 2020, the carrying amount of cash equivalents approximated fair value due to the short period of time to maturity. The estimated fair value of the available-for-sale investments may not be representative of values that will be realized in the future. Contractual maturities of investments in available-for-sale debt securities were as follows:
| As of April 30, 2021
| Amortized Cost |  | Fair Value
| In millions
Due in one year | $ | 12 |  |  | $ | 12 |
Non-marketable equity securities in privately held companies are included in Other non-current assets in the Consolidated Condensed Balance Sheets. These amounted to $48 million and $44 million as of April 30, 2021 and October 31, 2020, respectively. HP determines credit losses on cash equivalents and available-for-sale debt securities at the individual security level. All instruments are considered investment grade. No credit-related or noncredit-related impairment losses were recorded for the three and six months ended April 30, 2021. Derivative Instruments HP uses derivatives to offset business exposure to foreign currency and interest rate risk on expected future cash flows and on certain existing assets and liabilities. As part of its risk management strategy, HP uses derivative instruments, primarily forward contracts, interest rate swaps, total return swaps, treasury rate locks, forward starting swaps and, at times, option contracts to hedge certain foreign currency, interest rate and, return on certain investment exposures. HP may designate its derivative contracts as fair value hedges or cash flow hedges and classifies the cash flows with the activities that correspond to the underlying hedged items. Additionally, for derivatives not designated as hedging instruments, HP categorizes those economic hedges as other derivatives. HP recognizes all derivative instruments at fair value in the Consolidated Condensed Balance Sheets. As a result of its use of derivative instruments, HP is exposed to the risk that its counterparties will fail to meet their contractual obligations. Master netting agreements mitigate credit exposure to counterparties by permitting HP to net amounts due from HP to counterparty against amounts due to HP from the same counterparty under certain conditions. To further limit credit risk, HP has collateral security agreements that allow HP’s custodian to hold collateral from, or require HP to post collateral to, counterparties when aggregate derivative fair values exceed contractually established thresholds which are generally based on the credit ratings of HP and its counterparties. If HP’s or the counterparty’s credit rating falls below a specified credit rating, either party has the right to request full collateralization of the derivatives’ net liability position. The fair value of derivatives with credit contingent features in a net liability position was $258 million and $90 million as of April 30, 2021 and as of October 31, 2020, respectively, all of which were fully collateralized within two business days. Under HP’s derivative contracts, the counterparty can terminate all outstanding trades following a covered change of control event affecting HP that results in the surviving entity being rated below a specified credit rating. This credit contingent provision did not affect HP’s financial position or cash flows as of April 30, 2021 and October 31, 2020. Fair Value Hedges HP enters into fair value hedges, such as interest rate swaps, to reduce the exposure of its debt portfolio to changes in fair value resulting from changes in benchmark interest rates on HP’s future interest rate payments. For derivative instruments that are designated and qualify as fair value hedges, HP recognizes the change in fair value of the derivative instrument, as well as the offsetting change in the fair value of the hedged item, in Interest and other, net in the Consolidated Condensed Statements of Earnings in the period of change. During the six months ended April 30, 2021, HP entered into an additional $125 million notional amount interest rate swap designated as fair value hedges, to convert a portion of its previously issued $1.15 billion fixed-rate debt to floating and terminated a previously issued interest rate swap with a notional amount of $250 million that were de-designated as fair value hedges of certain fixed-rate debt securities. Cash Flow Hedges HP uses forward contracts, treasury rate locks, forward starting swaps and, at times, option contracts designated as cash flow hedges to protect against the foreign currency exchange and interest rate risks inherent in its forecasted net revenue, cost of revenue, operating expenses and debt issuance. HP’s foreign currency cash flow hedges mature predominantly within twelve months; however, hedges related to long-term procurement arrangements extend several years. For derivative instruments that are designated and qualify as cash flow hedges, HP initially records changes in fair value of the derivative instrument in Accumulated other comprehensive loss as a separate component of stockholders’ deficit in the Consolidated Condensed Balance Sheets and subsequently reclassifies these amounts into earnings in the period during which the hedged transaction is recognized in earnings. HP reports the changes in the fair value of the derivative instrument in the same financial statement line item as changes in the fair value of the hedged item. During the six months ended April 30, 2021, HP entered into a series of forward starting swap agreements with notional amounts totaling $750 million to hedge the exposure to variability in future cash flows resulting from changes in interest rates related to the anticipated issuance of long-term debt. These agreements were designated as cash flow hedges. Other Derivatives Other derivatives not designated as hedging instruments consist primarily of forward contracts used to hedge foreign currency-denominated balance sheet exposures. HP uses total return swaps to hedge its executive deferred compensation plan liability. For derivative instruments not designated as hedging instruments, HP recognizes changes in fair value of the derivative instrument, as well as the offsetting change in the fair value of the hedged item, in Interest and other, net in the Consolidated Condensed Statements of Earnings in the period of change. Hedge Effectiveness For interest rate swaps designated as fair value hedges, HP measures hedge effectiveness by offsetting the change in fair value of the hedged item with the change in fair value of the derivative. For foreign currency options, forward contracts and forward starting swaps designated as cash flow hedges, HP measures hedge effectiveness by comparing the cumulative change in fair value of the hedge contract with the cumulative change in fair value of the hedged item, both of which are based on forward rates. During the three and six months ended April 30, 2021 and 2020, no portion of the hedging instruments’ gain or loss was excluded from the assessment of effectiveness for fair value and cash flow hedges. Fair Value of Derivative Instruments in the Consolidated Condensed Balance Sheets Gross notional and fair value of derivative instruments in the Consolidated Condensed Balance Sheets were as follows:
| As of April 30, 2021 |  | As of October 31, 2020
| Outstanding Gross Notional |  | Other Current Assets |  | Other Non-Current Assets |  | Other Current Liabilities |  | Other Non-Current Liabilities |  | Outstanding Gross Notional |  | Other Current Assets |  | Other Non-Current Assets |  | Other Current Liabilities |  | Other Non-Current Liabilities
| In millions
Derivatives designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fair value hedges: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts | $ | 750 |  |  | $ | 2 |  |  | $ | — |  |  | $ | — |  |  | $ | 9 |  |  | $ | 875 |  |  | $ | 4 |  |  | $ | — |  |  | $ | — |  |  | $ | 3 |
Cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency contracts | 16,783 |  |  | 72 |  |  | 9 |  |  | 242 |  |  | 82 |  |  | 15,661 |  |  | 148 |  |  | 30 |  |  | 199 |  |  | 37 |
Interest rate contracts | 750 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total derivatives designated as hedging instruments | 18,283 |  |  | 74 |  |  | 9 |  |  | 242 |  |  | 91 |  |  | 16,536 |  |  | 152 |  |  | 30 |  |  | 199 |  |  | 40 |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency contracts | 5,399 |  |  | 12 |  |  | — |  |  | 19 |  |  | — |  |  | 5,319 |  |  | 13 |  |  | — |  |  | 20 |  |  | — |
Other derivatives | 150 |  |  | 2 |  |  | — |  |  | — |  |  | — |  |  | 142 |  |  | — |  |  | — |  |  | 3 |  |  | — |
Total derivatives not designated as hedging instruments | 5,549 |  |  | 14 |  |  | — |  |  | 19 |  |  | — |  |  | 5,461 |  |  | 13 |  |  | — |  |  | 23 |  |  | — |
Total derivatives | $ | 23,832 |  |  | $ | 88 |  |  | $ | 9 |  |  | $ | 261 |  |  | $ | 91 |  |  | $ | 21,997 |  |  | $ | 165 |  |  | $ | 30 |  |  | $ | 222 |  |  | $ | 40 |
Offsetting of Derivative Instruments HP recognizes all derivative instruments on a gross basis in the Consolidated Condensed Balance Sheets. HP does not offset the fair value of its derivative instruments against the fair value of cash collateral posted under its collateral security agreements. As of April 30, 2021 and October 31, 2020, information related to the potential effect of HP’s master netting agreements and collateral security agreements was as follows:
| In the Consolidated Condensed Balance Sheets |  |  |
|  |  |  |  |  |  | Gross Amounts Not Offset |  |  |
| Gross Amount Recognized (i) | Gross Amount Offset (ii) | Net Amount Presented (iii) = (i)–(ii) |  | Derivatives (iv) |  | Financial Collateral (v) |  |  | Net Amount (vi) = (iii)–(iv)–(v)
| In millions
As of April 30, 2021 |  |  |  |  |  |  |  |  |  |  |  |
Derivative assets | $ | 97 |  |  | $ | — |  |  | $ | 97 |  |  | $ | 89 |  |  | $ | — |  | (1) | $ | 8 |
Derivative liabilities | $ | 352 |  |  | $ | — |  |  | $ | 352 |  |  | $ | 89 |  |  | $ | 316 |  | (2) | $ | (53) |
As of October 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |
Derivative assets | $ | 195 |  |  | $ | — |  |  | $ | 195 |  |  | $ | 156 |  |  | $ | 4 |  | (1) | $ | 35 |
Derivative liabilities | $ | 262 |  |  | $ | — |  |  | $ | 262 |  |  | $ | 156 |  |  | $ | 130 |  | (2) | $ | (24) |
(1)Represents the cash collateral posted by counterparties as of the respective reporting date for HP’s asset position, net of derivative amounts that could be offset, as of, generally, two business days prior to the respective reporting date. (2)Represents the collateral posted by HP including any re-use of counterparty cash collateral as of the respective reporting date for HP’s liability position, net of derivative amounts that could be offset, as of, generally, two business days prior to the respective reporting date. Effect of Derivative Instruments in the Consolidated Condensed Statements of Earnings The pre-tax effect of derivative instruments and related hedged items in a fair value hedging relationship were as follows:
Derivative Instrument |  | Hedged Item |  | Location |  | Year |  | Total amounts of income/(expense) line items in the statement of financial performance in which the effects of fair value hedges are recorded |  | Gain/(loss) recognized in earnings on derivative instruments |  | Gain/(loss) recognized in earnings on hedged item
|  |  |  |  |  |  |  | In millions
Three months ended April 30 |  |  |  |  |  |  |  |  |  |
Interest rate contract |  | Fixed-rate debt |  | Interest and other, net |  | 2021 |  | $ | (26) |  |  | $ | (7) |  |  | $ | 7 |
|  |  |  |  |  | 2020 |  | $ | — |  |  | $ | 10 |  |  | $ | (10) |
Six months ended April 30 |  |  |  |  |  |  |  |  |  |
Interest rate contract |  | Fixed-rate debt |  | Interest and other, net |  | 2021 |  | $ | (51) |  |  | $ | (10) |  |  | $ | 10 |
|  |  |  |  |  | 2020 |  | $ | 13 |  |  | $ | 10 |  |  | $ | (10) |
The pre-tax effect of derivative instruments in cash flow hedging relationships included in Accumulated other comprehensive loss was as follows:
| Three months ended April 30 |  | Six months ended April 30
| 2021 |  | 2020 |  | 2021 |  | 2020
| In millions
Gain/(loss) recognized in Accumulated other comprehensive loss on derivatives: |  |  |  |  |  |  |
Foreign currency contracts | $ | (21) |  |  | $ | 239 |  |  | $ | (387) |  |  | $ | 299 |
Interest rate contracts | $ | — |  |  | $ | (8) |  |  | $ | — |  |  | $ | (8) |
The pre-tax effect of derivative instruments in cash flow hedging relationships included in earnings were as follows:
| Total amounts of income/(expense) line items in the statement of financial performance in which the effects of cash flow hedges are recorded |  | Gain/(loss) reclassified from Accumulated other comprehensive loss into earnings
| Three months ended April 30 |  | Six months ended April 30 |  | Three months ended April 30 |  | Six months ended April 30
| 2021 |  | 2020 |  | 2021 |  | 2020 |  | 2021 |  | 2020 |  | 2021 |  | 2020
| In millions
Net revenue | $ | 15,877 |  |  | $ | 12,469 |  |  | $ | 31,523 |  |  | $ | 27,087 |  |  | $ | (146) |  |  | $ | 62 |  |  | $ | (189) |  |  | $ | 123 |
Cost of revenue | (12,437) |  |  | (9,976) |  |  | (24,759) |  |  | (21,722) |  |  | (4) |  |  | (10) |  |  | (10) |  |  | (11) |
Other operating expenses | (2,078) |  |  | (1,667) |  |  | (4,081) |  |  | (3,674) |  |  | 1 |  |  | 1 |  |  | 1 |  |  | — |
Total | $ | 1,362 |  |  | $ | 826 |  |  | $ | 2,683 |  |  | $ | 1,691 |  |  | $ | (149) |  |  | $ | 53 |  |  | $ | (198) |  |  | $ | 112 |
As of April 30, 2021, HP expects to reclassify an estimated accumulated other comprehensive loss of $165 million, net of taxes, to earnings within the next twelve months associated with cash flow hedges along with the earnings effects of the related forecasted transactions. The amounts ultimately reclassified into earnings could be different from the amounts previously included in Accumulated other comprehensive loss based on the change of market rate, and therefore could have different impact on earnings. The pre-tax effect of derivative instruments not designated as hedging instruments recognized in Interest and other, net in the Consolidated Condensed Statements of Earnings for the three and six months ended April 30, 2021 and 2020 was as follows:
| Gain/(loss) recognized in earnings on derivative instrument
|  |  | Three months ended April 30 |  | Six months ended April 30
| Location |  | 2021 |  | 2020 |  | 2021 |  | 2020
|  |  | In millions
Foreign currency contracts | Interest and other, net |  | $ | (23) |  |  | $ | 25 |  |  | $ | (9) |  |  | $ | 17 |
Other derivatives | Interest and other, net |  | 2 |  |  | — |  |  | 5 |  |  | 5 |
Total |  |  | $ | (21) |  |  | $ | 25 |  |  | $ | (4) |  |  | $ | 22 |

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- Definition The entire disclosure for financial instruments. This disclosure includes, but is not limited to, fair value measurements of short and long term marketable securities, international currencies forward contracts, and auction rate securities. Financial instruments may include hedging and non-hedging currency exchange instruments, derivatives, securitizations and securities available for sale at fair value. Also included are investment results, realized and unrealized gains and losses as well as impairments and risk management disclosures. + References No definition available. + Details
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