Financial instruments

The Company uses derivative instruments to manage its exposure to interest rate and foreign currency exchange risks.

The notional amounts and fair value of derivative instruments outstanding were as follows (in millions):



November 30, 2018	Notional		Fair value		Location in Consolidated Condensed Balance Sheets
Derivatives designated as hedges:
Interest rate swaps	$	250	$	2	Other current liabilities
Cross currency interest rate swaps	400		3		Other non-current assets
Cross currency interest rate swaps	100		—		Other non-current liabilities
Derivatives not designated as hedges:
Foreign currency forwards	2,476		65		Other current assets
Foreign currency forwards	816		5		Other current liabilities



August 31, 2018	Notional		Fair value		Location in Consolidated Condensed Balance Sheets
Derivatives designated as hedges:
Interest rate swaps	$	250	$	1	Other current liabilities
Foreign currency forwards	15		—		Other current assets
Derivatives not designated as hedges:
Foreign currency forwards	3,273		52		Other current assets
Foreign currency forwards	825		4		Other current liabilities

The Company uses interest rate swaps to manage the interest rate exposure associated with some of its fixed-rate debt and designates them as fair value hedges. From time to time, the Company uses forward starting interest rate swaps to hedge its interest rate exposure of some of its anticipated debt issuances.

The Company has non-U.S. dollar denominated net investments and uses foreign currency denominated financial instruments, specifically foreign currency derivatives and foreign currency denominated debt, to hedge its foreign currency risk.

The Company utilizes foreign currency forward contracts and other foreign currency derivatives to hedge significant committed and highly probable future transactions and cash flows denominated in currencies other than the functional currency of the Company or its subsidiaries.

Fair value hedges

The Company holds an interest rate swap converting $250 million of its 5.250% fixed rate notes to a floating interest rate based on the six-month LIBOR in arrears plus a constant spread. The swap termination date coincide with the notes' maturity date, January 15, 2019. This swap was designated as a fair value hedge.

The gains and losses due to changes in fair value on the swap and on the hedged notes attributable to interest rate risk did not have a material impact on the Company’s Financial Statements. The changes in fair value of the Company’s debt that was swapped from fixed to variable rate and designated as fair value hedges are included in long-term debt on the Consolidated Condensed Balance Sheets (see note 7, debt).

Net investment hedges

The Company uses cross currency interest rate swaps as hedges of net investments in subsidiaries with non-U.S. dollar functional currencies. For qualifying net investment hedges, changes in the fair value of the derivatives are recorded in the currency translation adjustment within accumulated other comprehensive income (loss).

Derivatives not designated as hedges

The Company enters into derivative transactions that are not designated as accounting hedges. These derivative instruments are economic hedges of foreign currency risks. The income and (expense) due to changes in fair value of these derivative instruments were recognized in earnings as follows (in millions):



		Three months ended November 30,
	Location in Consolidated Condensed Statements of Earnings	2018		2017
Foreign currency forwards	Selling, general and administrative expenses	$	45	$	(19	)
Foreign currency forwards	Other income (expense)	3		34

Derivatives credit risk

Counterparties to derivative financial instruments expose the Company to credit-related losses in the event of counterparty nonperformance, and the Company regularly monitors the credit worthiness of each counterparty.

Derivatives offsetting

The Company does not offset the fair value amounts of derivative instruments subject to master netting agreements in the Consolidated Condensed Balance Sheets.