Financial Instruments

Derivative Financial Instruments

The Company is exposed to changes in foreign currency exchange rates relating to certain anticipated cash flows from its international operations and potential changes in the value of reported net assets of certain of its foreign operations. Consequently, the Company periodically uses derivative financial instruments to manage such risks. The Company does not enter into derivative transactions for speculative or trading purposes.

The following table summarizes the Company's outstanding derivative instruments on a gross basis as recorded in the consolidated balance sheets as of March 29, 2014 and March 30, 2013:



	Notional Amounts				Derivative Assets						Derivative Liabilities
Derivative Instrument^(a)	March 29, 2014		March 30, 2013		March 29, 2014			March 30, 2013			March 29, 2014				March 30, 2013
					Balance Sheet Line^(b)	Fair Value		Balance Sheet Line^(b)	Fair Value		Balance Sheet Line^(b)	Fair Value			Balance Sheet Line^(b)	Fair Value
	(millions)
Designated Hedges:
FC — Inventory purchases	$	476	$	366	^(c)	$	2	PP	$	14	AE	$	(5	)	AE	$	(2	)
FC — Other^(d)	223		25		—	—		—	—		AE	(2		)	AE	(1		)
NI — Euro Debt	—		140		—	N/A		—	^(e)		—	N/A			—	^(e)
Total Designated Hedges	$	699	$	531		$	2		$	14		$	(7	)		$	(3	)
Undesignated Hedges:
FC — Other^(f)	$	280	$	270	^(g)	$	6	PP	$	1	—	$	—		AE	$	(2	)
Total Hedges	$	979	$	801		$	8		$	15		$	(7	)		$	(5	)


^(a)	FC = Forward foreign currency exchange contracts; NI = Net Investment Hedge; Euro Debt = Euro-denominated 4.5% notes that matured on October 4, 2013.


^(b)	PP = Prepaid expenses and other current assets; AE = Accrued expenses and other current liabilities.


^(c)	$1 million included within prepaid expenses and other current assets and $1 million included within other non-current assets.


^(d)	Primarily designated hedges of foreign currency-denominated intercompany royalty payments, marketing contributions, and other net operational exposures.

^(e)

As of March 30, 2013, a portion of the previously outstanding Euro Debt's €209 million principal amount was designated as a hedge of the Company's net investment in certain of its European subsidiaries. The entire principal amount of this hedge was de-designated prior to the Euro Debt's maturity on October 4, 2013. See Note 15 for a summary of the carrying value and the estimated fair value of the Euro Debt as of March 30, 2013.


^(f)	Primarily undesignated hedges of foreign currency-denominated intercompany loans.


^(g)	$2 million included within prepaid expenses and other current assets and $4 million included within other non-current assets.

The Company records and presents the fair values of all of its derivative assets and liabilities in its consolidated balance sheets on a gross basis, even though they are subject to master netting arrangements. However, if the Company were to offset and record the asset and liability balances of all of its forward foreign currency exchange contracts on a net basis in accordance with the terms of each of its master netting arrangements, spread across eight separate counterparties, the amounts presented in the consolidated balance sheets as of March 29, 2014 and March 30, 2013 would be adjusted from the current gross presentation as detailed in the following table:



	March 29, 2014									March 30, 2013
Derivative Instrument	Gross Amounts Presented in the Consolidated Balance Sheet			Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements			Net Amount			Gross Amounts Presented in the Consolidated Balance Sheet			Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements			Net Amount
	(millions)
FC — Derivative assets	$	8		$	(1	)	$	7		$	15		$	(3	)	$	12
FC — Derivative liabilities	$	(7	)	$	1		$	(6	)	$	(5	)	$	3		$	(2	)

The Company's master netting arrangements do not require cash collateral to be pledged by the Company or its counterparties. Refer to Note 3 for further discussion of the Company's master netting arrangements.

The following tables summarize the pretax impact of the effective portion of gains and losses from the Company's derivative instruments on its consolidated financial statements for the fiscal years presented:



	Gains (Losses) Recognized in OCI								Gains (Losses) Reclassified from AOCI to Earnings							Location of Gains (Losses) Reclassified from AOCI to Earnings
	Fiscal Years Ended								Fiscal Years Ended
Derivative Instrument	March 29, 2014			March 30, 2013			March 31, 2012		March 29, 2014		March 30, 2013		March 31, 2012
	(millions)
Designated Cash Flow Hedges:
FC — Inventory purchases	$	(10	)	$	21		$	29	$	10	$	32	$	(2	)	Cost of goods sold
FC — Other	—			(1		)	5		—		4		(3		)	Foreign currency gains (losses)
	$	(10	)	$	20		$	34	$	10	$	36	$	(5	)
Designated Hedge of Net Investment:
Euro Debt^(a)	$	—		$	11		$	16	$	—	$	—	$	—
Total Designated Hedges	$	(10	)	$	31		$	50	$	10	$	36	$	(5	)


^(a)	Amounts recognized in OCI relate to remeasurement of the Euro Debt, which was repaid in October 2013, and would be recognized in earnings only upon the sale or liquidation of the hedged net investment.

During Fiscal 2014, the Company also recorded a foreign currency gain of $2 million associated with the discontinuance of certain cash flow hedges, as the related forecasted transactions were no longer probable of occurring.

As of March 29, 2014, it is expected that approximately $5 million of net losses deferred in AOCI related to derivative financial instruments will be recognized in earnings over the next twelve months. No material gains or losses relating to ineffective hedges were recognized during any of the fiscal years presented.

The following table summarizes the impact of gains and losses from the Company's undesignated hedge contracts on its consolidated financial statements for the fiscal years presented:



	Gains (Losses) Recognized in Earnings							Location of Gains (Losses) Recognized in Earnings
	Fiscal Years Ended
Derivative Instrument	March 29, 2014		March 30, 2013			March 31, 2012
	(millions)
Undesignated Hedges:
FC — Other	$	20	$	(4	)	$	1	Foreign currency gains (losses)
Total Undesignated Hedges	$	20	$	(4	)	$	1

The following is a summary of the Company's risk management strategies and the effect of those strategies on the consolidated financial statements.

Foreign Currency Risk Management

Forward Foreign Currency Exchange Contracts

The Company primarily enters into forward foreign currency exchange contracts as hedges to reduce its risk from exchange rate fluctuations on inventory purchases made in an entity's non-functional currency, intercompany royalty payments made by certain of its international operations, intercompany contributions to fund certain marketing efforts of its international operations, and other foreign currency-denominated operational cash flows. As part of its overall strategy to manage the level of exposure to the risk of foreign currency exchange rate fluctuations, primarily to changes in the value of the Euro, the Japanese Yen, the Hong Kong Dollar, the South Korean Won, and the Australian Dollar, the Company hedges a portion of its foreign currency exposures anticipated over a two-year period. In doing so, the Company uses foreign currency exchange forward contracts that generally have maturities of three months to two years to provide continuing coverage throughout the hedging period.

Hedge of Net Investment in Certain European Subsidiaries

Historically, the Company designated the principal amount of its outstanding Euro Debt as a hedge of its net investment in certain of its European subsidiaries. To the extent designated as a net investment hedge, changes in the Euro Debt's carrying value resulting from fluctuations in the Euro exchange rate were reported in equity within foreign currency translation gains (losses), a component of AOCI, as the debt was a highly effective hedge. The Euro Debt was repaid upon its maturity in October 2013.

See Note 3 for further discussion of the Company's accounting policies relating to its derivative financial instruments.

Investments

The following table summarizes the Company's short-term and non-current investments recorded in the consolidated balance sheets as of March 29, 2014 and March 30, 2013:



	March 29, 2014						March 30, 2013
Type of Investment	Short-term < 1 year		Non-current 1 - 3 years		Total		Short-term < 1 year		Non-current 1 - 3 years		Total
					(millions)
Available-for-sale:
Government bonds — U.S.	$	1	$	—	$	1	$	21	$	8	$	29
Government bonds — non-U.S.	—		—		—		67		25		92
Corporate bonds — non-U.S.	—		—		—		36		46		82
Variable rate municipal securities — U.S.	—		—		—		17		—		17
Auction rate securities^(a)	—		2		2		—		2		2
Total available-for-sale investments	$	1	$	2	$	3	$	141	$	81	$	222
Other:
Time deposits	$	487	$	—	$	487	$	184	$	—	$	184
Total investments	$	488	$	2	$	490	$	325	$	81	$	406


^(a)	Auction rate securities have characteristics similar to short-term investments. However, the Company has classified these securities as non-current investments in its consolidated balance sheets as current market conditions call into question its ability to redeem these investments for cash within the next twelve months.

No significant realized or unrealized gains or losses on available-for-sale investments or other-than-temporary impairment charges were recorded in any of the fiscal periods presented. Refer to Note 19 for further detail.

See Note 3 for further discussion of the Company's accounting policies relating to its investments.