Derivative Instruments and Hedging Activities

As of December 29, 2017, the Company had outstanding foreign exchange forward contracts which were designated as either cash flow hedges or non-designated hedges. The contract maturity dates of these foreign exchange forward contracts do not exceed 12 months. In addition, the Company had outstanding interest rate swaps which were designated as cash flow hedges. The Company determined the ineffectiveness associated with its cash flow hedges to be immaterial to the Condensed Consolidated Financial Statements for the three and six months ended December 29, 2017 and December 30, 2016.

As of December 29, 2017, the amount of existing net gains related to cash flow hedges recorded in AOCI that are expected to be reclassified into earnings over the next twelve months was $8 million. In addition, as of December 29, 2017, the Company did not have any foreign exchange forward contracts with credit-risk-related contingent features.

A change in the fair value of non-designated hedges is recognized in earnings in the period incurred and is reported as a component of Other income (expense), net. The changes in fair value on these contracts were immaterial to the Condensed Consolidated Financial Statements for the three and six months ended December 29, 2017 and December 30, 2016.

Derivative Instruments

The fair value and balance sheet location of the Company’s derivative instruments were as follows:



	Derivative Assets
	Other current assets
	December 29, 2017		June 30, 2017
	(in millions)
Foreign exchange forward contracts, designated	$	6	$	6
Foreign exchange forward contracts, not designated	5		10
Interest rate swaps, designated	8		—
Total derivatives	$	19	$	16



	Derivative Liabilities
	Accrued expenses
	December 29, 2017		June 30, 2017
	(in millions)
Foreign exchange forward contracts, designated	$	4	$	2
Foreign exchange forward contracts, not designated	3		6
Interest rate swaps, designated	—		1
Total derivatives	$	7	$	9

Netting Arrangements

Under certain provisions and conditions within agreements with counterparties to the Company’s foreign exchange forward contracts, subject to applicable requirements, the Company has the right of offset associated with the Company’s foreign exchange forward contracts and is allowed to net settle transactions of the same currency with a single net amount payable by one party to the other. As of December 29, 2017 and June 30, 2017, the effect of rights of offset was not material and the Company did not offset or net the fair value amounts of derivative instruments in its Condensed Consolidated Balance Sheets.

Effect of Derivative Contracts on the Condensed Consolidated Statements of Operations

The impact of derivative contracts designated as hedging instruments on the Condensed Consolidated Financial Statements was as follows:



	Amount of Gain (Loss) Recognized in AOCI					Amount of Gain (Loss) Recognized in AOCI
	Three Months Ended					Six Months Ended
	December 29, 2017		December 30, 2016			December 29, 2017		December 30, 2016
	(in millions)
Derivatives designated as hedging instruments:
Foreign exchange forward contracts	$	7	$	(119	)	$	7	$	(97	)
Interest rate swaps	7		—			8		—
Total	$	14	$	(119	)	$	15	$	(97	)



	Amount of Gain (Loss) Reclassified from AOCI into Earnings				Amount of Gain (Loss) Reclassified from AOCI into Earnings
	Three Months Ended				Six Months Ended
	December 29, 2017		December 30, 2016		December 29, 2017		December 30, 2016
	(in millions)
Derivatives designated as hedging instruments:
Foreign exchange forward contracts	$	4	$	16	$	1	$	42
Total	$	4	$	16	$	1	$	42

The total net realized transaction and foreign exchange forward contract currency gains and losses were not material to the Condensed Consolidated Financial Statements for the three and six months ended December 29, 2017 and December 30, 2016.