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Derivative Financial Instruments and Hedging Activities | 12 Months Ended
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Aug. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments and Hedging Activities | Derivative Financial Instruments and Hedging Activities The Company is directly and indirectly affected by changes in certain market conditions. These changes in market conditions may adversely impact the Company’s financial performance and are referred to as market risks. The Company, where deemed appropriate, uses derivatives as risk management tools to mitigate the potential impact of certain market risks. The primary market risks managed by the Company through the use of derivative instruments are foreign currency risk and interest rate risk. Foreign Currency Risk Management Forward contracts are put in place to manage the foreign currency risk associated with the anticipated foreign currency denominated revenues and expenses. A hedging relationship existed with an aggregate notional amount outstanding of $355.2 million and $334.1 million as of August 31, 2020 and 2019, respectively. The related forward foreign exchange contracts have been designated as hedging instruments and are accounted for as cash flow hedges. The forward foreign exchange contract transactions will effectively lock in the value of anticipated foreign currency denominated revenues and expenses against foreign currency fluctuations. The anticipated foreign currency denominated revenues and expenses being hedged are expected to occur between September 1, 2020 and August 31, 2021. In addition to derivatives that are designated as hedging instruments and qualify for hedge accounting, the Company also enters into forward contracts to economically hedge transactional exposure associated with commitments arising from trade accounts receivable, trade accounts payable, fixed purchase obligations and intercompany transactions denominated in a currency other than the functional currency of the respective operating entity. The aggregate notional amount of these outstanding contracts as of August 31, 2020 and 2019, was $2.9 billion and $2.5 billion, respectively.
Refer to Note 17 – “Fair Value Measurements” for the fair values and classification of the Company’s derivative instruments.
The gains and losses recognized in earnings due to hedge ineffectiveness and the amount excluded from effectiveness testing were not material for all periods presented and are included as components of net revenue, cost of revenue and selling, general and administrative expense, which are the same line items in which the hedged items are recorded. The following table presents the net gains (losses) from forward contracts recorded in the Consolidated Statements of Operations for the periods indicated (in thousands):
Derivatives Not Designated as Hedging Instruments Under ASC 815 |  | Location of Gain (Loss) on Derivatives Recognized in Net Income |  | Amount of Gain (Loss) Recognized in Net Income on Derivatives
|  |  |  | Fiscal Year Ended August 31,
|  |  |  | 2020 |  | 2019 |  | 2018
Forward foreign exchange contracts(1) |  | Cost of revenue |  | $ | 42,077 |  |  | $ | (29,557 | ) |  | $ | (27,774 | )
(1) | For the fiscal year ended August 31, 2020, the Company recognized $47.4 million of foreign currency losses in cost of revenue, which are offset by the gains from the forward foreign exchange contracts. For the fiscal years ended August 31, 2019 and 2018, the Company recognized $14.9 million and $36.7 million, respectively, of foreign currency gains in cost of revenue, which are offset by the losses from the forward foreign exchange contracts.
Interest Rate Risk Management The Company periodically enters into interest rate swaps to manage interest rate risk associated with the Company’s borrowings. Cash Flow Hedges Contemporaneously with the issuance of our 3.000% Notes in July 2020, the Company amended interest rate swap agreements with a notional value of $200.0 million, with mandatory termination dates from August 15, 2020 to February 15, 2022 and de-designated the interest rate swaps as cash flow hedges (the “2020 Extended Interest Rate Swaps”). No ineffectiveness was recognized in earnings upon the termination of the cash flow hedges. In addition, the Company entered into interest rate swaps to offset future exposures of fluctuations in the fair value of the 2020 Extended Interest Rate Swaps (the “Offsetting Interest Rate Swaps”). The change in the fair value of the 2020 Extended Interest Rate Swaps and the Offsetting Interest Rate Swaps will be recorded in the Consolidated Statements of Income through the maturity date as an adjustment to interest expense.

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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 + Details
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