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Derivative Financial Instruments and Hedging Activities | 6 Months Ended
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Feb. 29, 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 $257.2 million and $334.1 million as of February 29, 2020 and August 31, 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 March 1, 2020 and November 30, 2020. 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 February 29, 2020 and August 31, 2019, was $2.4 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 gains from forward contracts recorded in the Condensed Consolidated Statements of Operations for the periods indicated (in thousands):
Derivatives Not Designated as Hedging Instruments Under ASC 815 |  | Location of Gain on Derivatives Recognized in Net Income |  | Amount of Gain Recognized in Net Income on Derivatives
|  |  |  | Three months ended |  | Six months ended
|  |  |  | February 29, 2020 |  | February 28, 2019 |  | February 29, 2020 |  | February 28, 2019
Forward foreign exchange contracts(1) |  | Cost of revenue |  | $ | 6,801 |  |  | $ | 49,794 |  |  | $ | 33,518 |  |  | $ | 42,808 |
(1) | For the three months and six months ended February 29, 2020, the Company recognized $7.6 million and $36.4 million, respectively, of foreign currency losses in cost of revenue, which are offset by the gains from the forward foreign exchange contracts. During the three months and six months ended February 28, 2019, the Company recognized $57.1 million and $52.6 million, respectively, of foreign currency losses in cost of revenue, which are offset by the gains 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 The following table presents the interest rate swaps outstanding as of February 29, 2020, which have been designated as hedging instruments and accounted for as cash flow hedges:
Interest Rate Swap Summary | Hedged Interest Rate Payments |  | Aggregate Notional Amount (in millions) |  | Effective Date |  | Expiration Date (1) |
Forward Interest Rate Swap |  |  |  |  |  |  |  |
Anticipated Debt Issuance | Fixed |  | $ | 200.0 |  |  | Oct 22, 2018 |  | Dec 15, 2020 | (2)
Interest Rate Swaps |  |  |  |  |  |  |  |
Debt obligations | Variable |  | $ | 550.0 |  |  | Aug 24, 2018 and Oct 11, 2018 |  | Aug 24, 2020 and Aug 31, 2020 | (3)
(1) | The contracts will be settled with the respective counterparties on a net basis at the expiration date for the forward interest rate swap and at each settlement date for the interest rate swaps.
(2) | If the anticipated debt issuance occurs before December 15, 2020, the contracts will be terminated simultaneously with the debt issuance.
(3) The Company pays interest based upon a fixed rate as agreed upon with the respective counterparties and receives variable rate interest payments based on the one-month and three-month LIBOR for borrowings under the Credit Facility and certain other debt obligations. Of the amount hedged, $350.0 million expires on August 24, 2020 and $200.0 million expires on August 31, 2020.

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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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