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Derivative Financial Instruments and Hedging Activities | 6 Months Ended
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Feb. 28, 2023
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 $1.0 billion and $1.4 billion as of February 28, 2023 and August 31, 2022, 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, 2023 and November 30, 2023. 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 28, 2023 and August 31, 2022, was $3.6 billion and $3.4 billion, respectively. The gains and losses recognized in earnings due to amounts 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. In addition, the Company has entered into forward foreign currency exchange contracts to hedge a portion of its net investment in foreign currency denominated operations, which are designated as net investment hedges. The net investment hedges have an aggregate notional amount outstanding of $127 million and $0 million as of February 28, 2023 and August 31, 2022, respectively, and are expected to mature in August 2023. The effective portion of the gain or loss on net investment hedges is reported in OCI to offset the change in the carrying value of the net investment being hedged until the complete or substantially complete liquidation of the hedged foreign operation. The excluded components for the net investment hedges are not material and are recognized in interest expense. Refer to Note 16 – “Fair Value Measurements” for the fair values and classification of the Company’s derivative instruments. The following table presents the net gains (losses) from forward contracts recorded in the Condensed Consolidated Statements of Operations for the periods indicated (in millions):
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
|  |  |  | Three months ended |  | Six months ended
|  |  |  | February 28, 2023 |  | February 28, 2022 |  | February 28, 2023 |  | February 28, 2022
Forward foreign exchange contracts(1) |  | Cost of revenue |  | $ | 30 |  |  | $ | 22 |  |  | $ | (16) |  |  | $ | 60 |
(1)For the three months ended February 28, 2023, the Company recognized $53 million of foreign currency losses in cost of revenue, which are offset by the gains from the forward foreign exchange contracts. For the six months ended February 28, 2023, the Company recognized $4 million of foreign currency losses in cost of revenue, in addition to losses from the forward foreign exchange contracts. For the three months and six months ended February 28, 2022, the Company recognized $9 million and $37 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 or anticipated debt issuances. Cash Flow Hedges The following table presents the interest rate swaps outstanding as of February 28, 2023, which have been designated as hedging instruments and are accounted for as cash flow hedges (in millions):
Interest Rate Swap Summary | Hedged Interest Rate Payments |  | Aggregate Notional Amount |  | Effective Date |  | Expiration Date |
Forward Interest Rate Swap |  |  |  |  |  |  |  |
Anticipated Debt Issuance | Fixed |  | $ | 150 |  |  | May 24, 2021 |  | July 31, 2024 | (1)(2)
Anticipated Debt Issuance | Fixed |  | $ | 100 |  |  | August 8, 2022 |  | July 31, 2024 | (1)(2)
(1)The contracts will be settled with the respective counterparties on a net basis at the expiration date for the forward interest rate swap. (2)If the anticipated debt issuance occurs before July 31, 2024, the contracts will be terminated simultaneously with the debt issuance.

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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 https://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 https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008 + Details
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