DERIVATIVE FINANCIAL INSTRUMENTS

6 Months Ended

Nov. 30, 2020

Derivative Instruments And Hedging Activities Disclosure [Abstract]

7.	DERIVATIVE FINANCIAL INSTRUMENTS

We held the following derivative instruments that were designated and accounted for as hedging instruments pursuant to ASC 815, Derivatives and Hedging (ASC 815) as of November 30, 2020 and May 31, 2020:

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interest rate swap agreements, which are used to protect us against changes in the fair values of certain of our fixed-rate borrowings attributable to the movements in benchmark interest rates. We have designated these swap agreements as qualifying hedging instruments and are accounting for them as fair value hedges pursuant to ASC 815;

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cross-currency interest rate swap agreements, which are used to protect us against changes in the fair values of certain of our fixed-rate Euro-denominated borrowings attributable to the movements in benchmark interest rates and foreign currency exchange rates by effectively converting the fixed-rate, Euro-denominated borrowings, including the annual interest payments and the payment of principal at maturity, to variable-rate, U.S. Dollar-denominated debt based on LIBOR. We have designated these swap agreements as qualifying hedging instruments and are accounting for them as fair value hedges pursuant to ASC 815; and

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cross-currency swap agreements, which are used to manage foreign currency exchange risk by converting certain of our fixed-rate Euro-denominated borrowings including periodic interest payments and the payment of principal at maturity to fixed-rate U.S. Dollar-denominated debt and are accounted for as cash flow hedges pursuant to ASC 815.

We also held certain foreign currency contracts that were not designated as hedges pursuant to ASC 815. As of November 30, 2020 and May 31, 2020, the notional amounts of such forward contracts we held to purchase U.S. Dollars in exchange for other major international currencies were $3.9 billion and $4.2 billion, respectively, and the

notional amounts of forward contracts we held to sell U.S. Dollars in exchange for other major international currencies were $3.9 billion as of the end of each period. The fair values of our outstanding foreign currency forward contracts were nominal as of November 30, 2020 and May 31, 2020. Net gains or losses related to these forward contracts are included in non-operating income, net.

See Note 10 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2020 for additional information regarding the purpose, accounting and classification of our derivative instruments. None of our derivative instruments are used for trading purposes. The effects of derivative instruments designated as hedges on certain of our condensed consolidated financial statements were as follows as of or for each of the respective periods presented below (amounts presented exclude any income tax effects):

Fair Values of Derivative Instruments Designated as Hedges in Condensed Consolidated Balance Sheets

		Fair Value as of
(in millions)	Balance Sheet Location	November 30, 2020		May 31, 2020
Derivative assets:
Interest rate swap agreements designated as fair value hedges	Other current assets	$	17	$	—
Cross-currency interest rate swap agreements designated as fair value hedges	Other non-current assets		55		—
Interest rate swap agreements designated as fair value hedges	Other non-current assets		—		29
Total derivative assets		$	72	$	29
Derivative liabilities:
Cross-currency swap agreements designated as cash flow hedges	Other current liabilities	$	137	$	251
Cross-currency interest rate swap agreements designated as fair value hedges	Other non-current liabilities		—		17
Total derivative liabilities		$	137	$	268

Effects of Fair Value Hedging Relationships on Hedged Items in Condensed Consolidated Balance Sheets

(in millions)	November 30, 2020		May 31, 2020
Notes payable, current:
Carrying amount of hedged item	$	1,517	$	—
Cumulative hedging adjustment included in the carrying amount	$	17	$	—
Notes payable and other borrowings, non-current:
Carrying amounts of hedged items	$	2,217	$	3,680
Cumulative hedging adjustments included in the carrying amount	$	111	$	75

Effects of Derivative Instruments Designated as Hedges on Income

	Three Months Ended November 30,
	2020						2019
(in millions)	Non-operating (expenses) income, net			Interest expense			Non-operating (expenses) income, net			Interest expense
Condensed consolidated statements of operations line amounts in which the hedge effects were recorded	$	(11	)	$	(600	)	$	92		$	(465	)
Gain (loss) on hedges recognized in income:
Interest rate swap agreements designated as fair value hedges:
Derivative instruments	$	—		$	(7	)	$	—		$	(4	)
Hedged items		—			7			—			4
Cross-currency interest rate swap agreements designated as fair value hedges:
Derivative instruments		(2	)		2			5			(16	)
Hedged items		1			(2	)		(3	)		16
Cross-currency swap agreements designated as cash flow hedges:
Amount of gain (loss) reclassified from accumulated OCI		12			—			(10	)		—
Total gain (loss) on hedges recognized in income	$	11		$	—		$	(8	)	$	—

	Six Months Ended November 30,
	2020						2019
(in millions)	Non-operating (expenses) income, net			Interest expense			Non-operating (expenses) income, net			Interest expense
Condensed consolidated statements of operations line amounts in which the hedge effects were recorded	$	(13	)	$	(1,214	)	$	191		$	(959	)
Gain (loss) on hedges recognized in income:
Interest rate swap agreements designated as fair value hedges:
Derivative instruments	$	—		$	(12	)	$	—		$	12
Hedged items		—			12			—			(12	)
Cross-currency interest rate swap agreements designated as fair value hedges:
Derivative instruments		70			4			(13	)		7
Hedged items		(62	)		(4	)		12			(7	)
Cross-currency swap agreements designated as cash flow hedges:
Amount of gain (loss) reclassified from accumulated OCI		115			—			(18	)		—
Total gain (loss) on hedges recognized in income	$	123		$	—		$	(19	)	$	—

Gain (Loss) on Derivative Instruments Designated as Hedges included in Other Comprehensive Income (OCI)

Three Months Ended

November 30,

Six Months Ended

November 30,

(in millions)

2020

2019

2020

2019

Cross-currency swap agreements designated as cash flow hedges

)

114

(34

)