The Company uses operational and economic hedges, including currency exchange rate derivative contracts and interest rate derivative instruments, to manage the impact of currency exchange and interest rate changes on earnings and cash flows. In addition, the Company uses cross currency interest rate swaps to manage currency risk related to certain debt. In order to minimize earnings and cash flow volatility resulting from currency exchange rate changes, the Company enters into derivative instruments, principally forward currency exchange rate contracts. These contracts are designed to hedge anticipated foreign currency transactions and changes in the value of specific assets and liabilities. At inception of the contract, the derivative is designated as either a freestanding derivative or a cash flow hedge. The primary currencies of the derivative instruments are the Euro, Japanese Yen, and British Pound. The Company does not enter into currency exchange rate derivative contracts for speculative purposes. The gross notional amount of all currency exchange rate derivative instruments outstanding was $12.1 billion and $11.1 billion at January 24, 2020 and April 26, 2019, respectively.

The Company also uses derivative and non-derivative instruments to manage the impact of currency exchange rate changes on net investments in foreign currency-denominated operations. The information that follows explains the various types of derivatives and financial instruments used by the Company, reasons the Company uses such instruments, and the impact such instruments have on the Company’s consolidated balance sheets and statements of income.

Freestanding derivative contracts are primarily used to offset the Company’s exposure to the change in value of specific foreign-currency-denominated assets and liabilities, and to offset variability of cash flows associated with forecasted transactions denominated in foreign currencies. The gross notional amount of the Company's freestanding currency exchange rate contracts outstanding at January 24, 2020 and April 26, 2019 was $5.2 billion and $4.3 billion, respectively. The Company's freestanding currency exchange rate contracts are not designated as hedges, and therefore, changes in the value of these contracts are recognized in earnings, thereby offsetting the current earnings effect of the related change in value of foreign-currency-denominated assets, liabilities, and cash flows.

The Company also uses total return swaps to hedge the liability of a non-qualified, deferred compensation plan. The gross notional amount of the Company's total return swaps outstanding at January 24, 2020 and April 26, 2019 was $215 million and $191 million, respectively. The Company's total return swaps are not designated as hedges, and therefore, changes in the value of these instruments are recognized in earnings. The cash flows related to the Company's freestanding derivative contracts are reported as operating activities in the consolidated statements of cash flows.


		Three months ended						Nine months ended
(in millions)	Classification	January 24, 2020		January 25, 2019		January 24, 2020		January 25, 2019
Currency exchange rate contracts	Other operating (income) expense, net	$	2	$	30	$	(4)	$	(171)
Total return swaps	Other operating (income) expense, net	(17)		—		(22)		—
Total		$	(15)	$	30	$	(26)	$	(171)

Forward contracts designated as cash flow hedges are designed to hedge the variability of cash flows associated with forecasted transactions denominated in a foreign currency that will take place in the future. The gross notional amount of these contracts, designated as cash flow hedges, outstanding at January 24, 2020 and April 26, 2019 was $6.9 billion and $6.8 billion, respectively, and will mature within the subsequent two-year period. For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on the derivative instrument is reported as a component of accumulated other comprehensive loss. The gain or loss on the derivative instrument is reclassified into earnings and is included in other operating (income) expense, net in the consolidated statements of income in the same period or periods during which the hedged transaction affects earnings. Amounts excluded from the measurement of hedge effectiveness are recognized in earnings in the current period. The cash flows related to all of the Company's derivative instruments designated as cash flow hedges are reported as operating activities in the consolidated statements of cash flows. No components of the hedge contracts were excluded in the measurement of hedge effectiveness, and no forward contracts designated as cash flow hedges were derecognized or discontinued during the three and nine months ended January 24, 2020 and January 25, 2019.


	Three months ended						Nine months ended
	January 24, 2020		January 25, 2019		January 24, 2020		January 25, 2019
(in millions)	Other operating (income) expense, net		Other operating (income) expense, net		Other operating (income) expense, net		Other operating (income) expense, net
Total amounts of income and expense line items presented in the consolidated statements of income in which the effects of cash flow hedges are recorded	$	(39)	$	57	$	88	$	278



Currency exchange rate contracts designated as cash flow hedges:
Amount of (gain) loss reclassified from AOCI into income	(82)		(48)		(206)		(56)

Forward starting interest rate derivative instruments designated as cash flow hedges are designed to manage the exposure to interest rate volatility with regard to future issuances of fixed-rate debt. The gains or losses on forward starting interest rate derivative instruments that are designated and qualify as cash flow hedges are reported as a component of accumulated other comprehensive loss. Beginning in the period in which the planned debt issuance occurs and the related derivative instruments are terminated, the gains or losses are then reclassified into interest expense over the term of the related debt. For the three and

At January 24, 2020 and April 26, 2019 the Company had $157 million and $194 million, respectively, in after-tax net unrealized gains associated with cash flow hedging instruments recorded in accumulated other comprehensive loss. The Company expects that $145 million of after-tax net unrealized gains at January 24, 2020 will be recognized in the consolidated statements of income over the next 12 months.

Interest rate derivative instruments designated as fair value hedges are designed to manage the exposure to interest rate movements and to reduce borrowing costs by converting fixed-rate debt into floating-rate debt. Under these agreements, the Company agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount.

Changes in the fair value of the derivative instrument are recognized in interest expense and are offset by changes in the fair value of the underlying debt instrument. The gains from terminated interest rate swap agreements are recognized in long-term debt, increasing the outstanding balances of the debt, and amortized as a reduction of interest expense over the remaining life of the related debt. The cash flows related to the Company's interest rate derivative instruments designated as fair value hedges are reported as operating activities in the consolidated statements of cash flows.

At January 24, 2020 the Company had no interest rate swaps outstanding designated as fair value hedges, as the Company terminated previously held swaps in connection with the tender and early redemption of the underlying senior notes during the first quarter of fiscal year 2020. At April 26, 2019, the Company had interest rate swaps in gross notional amounts of $1.2 billion, designated as fair value hedges of underlying fixed-rate senior note obligations, including the Company's $500 million 4.125 percent 2011 Senior Notes due fiscal year 2021 and the $675 million 3.125 percent 2012 Senior Notes due fiscal year 2022.

The gain recognized upon termination of interest rate swaps was not significant for the three and nine months ended January 24, 2020. At April 26, 2019, the market value of outstanding interest rate swap agreements was an unrealized gain of $9 million which was recorded in other assets, with the offset recorded in long-term debt on the consolidated balance sheets. The Company did not recognize any gains or losses during the three or nine months ended January 24, 2020 and January 25, 2019 on firm commitments that no longer qualify as fair value hedges.


(in millions)	Carrying Amount of Hedged Assets/(Liabilities)						Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)
Location on the Consolidated Balance Sheet	January 24, 2020		April 26, 2019		January 24, 2020		April 26, 2019
Long-term debt	$	—	$	(1,175)	$	—	$	9

The Company has designated Euro-denominated debt as a net investment hedge of certain of its European operations to manage the exposure to currency and exchange rate movements for foreign currency-denominated net investments in foreign operations. At January 24, 2020, the Company had €12.0 billion, or $13.3 billion, of outstanding Euro-denominated debt designated as a hedge of its net investment in certain of its European operations, which will mature in fiscal years 2021 through 2050.

Additionally, during the first quarter of fiscal year 2020, the Company entered into and settled forward currency exchange rate contracts to manage the exposure to exchange rate movements in anticipation of the issuance of Euro-denominated senior notes. Certain of these forward currency exchange rate contracts were designated as a net investment hedge of certain of the Company's European operations. These contracts matured in conjunction with the issuance of Euro-denominated debt in the first quarter of fiscal year 2020.

For instruments that are designated and qualify as net investment hedges, the gains or losses are reported as a component of accumulated other comprehensive loss. The gains or losses are reclassified into earnings upon a liquidation event or deconsolidation of the foreign subsidiary. Amounts excluded from the assessment of effectiveness are recognized in other

At January 24, 2020 and April 26, 2019 the Company had $18 million in after-tax unrealized gains, and $169 million in after-tax unrealized losses, respectively, associated with net investment hedges recorded in accumulated other comprehensive loss. The Company does not expect any of the after-tax unrealized gains at January 24, 2020 to be recognized in the consolidated statements of income over the next 12 months.

The following tables summarize the balance sheet classification and fair value of derivative instruments included in the consolidated balance sheets at January 24, 2020 and April 26, 2019. The fair value amounts are presented on a gross basis, and are segregated between derivatives that are designated and qualify as hedging instruments and those that are not designated and do not qualify as hedging instruments and are further segregated by type of contract within those two categories.


	January 24, 2020
	Derivative Assets				Derivative Liabilities
(in millions)	Balance Sheet Classification	Fair Value		Balance Sheet Classification	Fair Value
Derivatives designated as hedging instruments
Currency exchange rate contracts	Other current assets	$	183	Other accrued expenses	$	11

Currency exchange rate contracts	Other assets	75		Other liabilities	12
Total derivatives designated as hedging instruments		258			23
Derivatives not designated as hedging instruments
Currency exchange rate contracts	Other current assets	9		Other accrued expenses	10
Total return swap	Other current assets	16		Other accrued expenses	—
Cross currency interest rate contracts	Other current assets	1		Other accrued expenses	—


Total derivatives not designated as hedging instruments		26			10
Total derivatives		$	284		$	33


	April 26, 2019
	Derivative Assets				Derivative Liabilities
(in millions)	Balance Sheet Classification	Fair Value		Balance Sheet Classification	Fair Value
Derivatives designated as hedging instruments
Currency exchange rate contracts	Other current assets	$	234	Other accrued expenses	$	1
Interest rate contracts	Other assets	9		Other liabilities	—
Currency exchange rate contracts	Other assets	78		Other liabilities	1
Total derivatives designated as hedging instruments		321			2
Derivatives not designated as hedging instruments
Currency exchange rate contracts	Other current assets	23		Other accrued expenses	17
Total return swaps	Other current assets	15		Other accrued expenses	—
Cross currency interest rate contracts	Other current assets	6		Other accrued expenses	—

Total derivatives not designated as hedging instruments		44			17
Total derivatives		$	365		$	19

The Company has elected to present the fair value of derivative assets and liabilities within the consolidated balance sheets on a gross basis, even when derivative transactions are subject to master netting arrangements and may otherwise qualify for net presentation. The cash flows related to collateral posted and received are reported gross as investing and financing activities, respectively, in the consolidated statements of cash flows.

The following tables provide information as if the Company had elected to offset the asset and liability balances of derivative instruments, netted in accordance with various criteria as stipulated by the terms of the master netting arrangements with each of the counterparties. Derivatives not subject to master netting arrangements are not eligible for net presentation.


	January 24, 2020
			Gross Amount Not Offset on the Balance Sheet
(in millions)	Gross Amount of Recorded Assets (Liabilities)		Financial Instruments		Cash Collateral Posted (Received)		Net Amount
Derivative assets:
Currency exchange rate contracts	$	267	$	(33)	$	(5)	$	229

Total return swaps	16		—		—		16
Cross currency interest rate contracts	1		—		—		1
	284		(33)		(5)		246
Derivative liabilities:
Currency exchange rate contracts	(33)		33		—		—



	(33)		33		—		—
Total	$	251	$	—	$	(5)	$	246