Fair Value Measurements

12 Months Ended

May 31, 2020

NOTE 6 — FAIR VALUE MEASUREMENTS

The following tables present information about the Company's financial assets measured at fair value on a recurring basis as of May 31, 2020 and 2019 and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement. Refer to Note 1 — Summary of Significant Accounting Policies for additional detail regarding the Company's fair value measurement methodology.



	MAY 31, 2020
(Dollars in millions)	ASSETS AT FAIR VALUE		CASH AND EQUIVALENTS		SHORT-TERM INVESTMENTS
Cash	$	596	$	596	$	—
Level 1:
U.S. Treasury securities	1,204		800		404
Level 2:
Commercial paper and bonds	32		—		32
Money market funds	5,973		5,973		—
Time deposits	981		979		2
U.S. Agency securities	1		—		1
Total Level 2	6,987		6,952		35
TOTAL	$	8,787	$	8,348	$	439



	MAY 31, 2019
(Dollars in millions)	ASSETS AT FAIR VALUE		CASH AND EQUIVALENTS		SHORT-TERM INVESTMENTS
Cash	$	853	$	853	$	—
Level 1:
U.S. Treasury securities	347		200		147
Level 2:
Commercial paper and bonds	34		1		33
Money market funds	1,637		1,637		—
Time deposits	1,791		1,775		16
U.S. Agency securities	1		—		1
Total Level 2	3,463		3,413		50
TOTAL	$	4,663	$	4,466	$	197

As of May 31, 2020, the Company held $396 million of available-for-sale debt securities with maturity dates within one year and $43 million with maturity dates over one year and less than five years in Short-term investments on the Consolidated Balance Sheets. The fair value of the Company's available-for-sale debt securities approximates their amortized cost.

Included in Interest expense (income), net was interest income related to the Company's investment portfolio of $62 million, $82 million and $70 million for the years ended May 31, 2020, 2019 and 2018, respectively.

The Company elects to record the gross assets and liabilities of its derivative financial instruments on the Consolidated Balance Sheets. The Company's derivative financial instruments are subject to master netting arrangements that allow for the offset of assets and liabilities in the event of default or early termination of the contract. Any amounts of cash collateral received related to these instruments associated with the Company's credit-related contingent features are recorded in Cash and equivalents and Accrued liabilities, the latter of which would further offset against the Company's derivative asset balance. Any amounts of cash collateral posted related to these instruments associated with the Company's credit-related contingent features are recorded in Prepaid expenses and other current assets, which would further offset against the Company's derivative liability balance. Cash collateral received or posted related to the Company's credit related contingent features is presented in the Cash provided by operations component of the Consolidated Statements of Cash Flows. Any amounts of non-cash collateral received, such as securities, are not recorded on the Consolidated Balance Sheets pursuant to U.S. GAAP. For further information related to credit risk, refer to Note 14 — Risk Management and Derivatives.

The following tables present information about the Company's derivative assets and liabilities measured at fair value on a recurring basis as of May 31, 2020 and 2019 and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement.



	MAY 31, 2020
	DERIVATIVE ASSETS						DERIVATIVE LIABILITIES
(Dollars in millions)	ASSETS AT FAIR VALUE		OTHER CURRENT ASSETS		OTHER LONG-TERM ASSETS		LIABILITIES AT FAIR VALUE		ACCRUED LIABILITIES		OTHER LONG-TERM LIABILITIES
Level 2:
Foreign exchange forwards and options⁽¹⁾	$	94	$	91	$	3	$	205	$	188	$	17
Embedded derivatives	1		1		—		2		2		—
TOTAL	$	95	$	92	$	3	$	207	$	190	$	17


(1)	If the foreign exchange derivative instruments had been netted on the Consolidated Balance Sheets, the asset and liability positions would have been reduced by $76 million as of May 31, 2020. As of that date, no amount of cash collateral had been received or posted on the derivative asset and liability balances related to these foreign exchange derivative instruments.



	MAY 31, 2019
	DERIVATIVE ASSETS						DERIVATIVE LIABILITIES
(Dollars in millions)	ASSETS AT FAIR VALUE		OTHER CURRENT ASSETS		OTHER LONG-TERM ASSETS		LIABILITIES AT FAIR VALUE		ACCRUED LIABILITIES		OTHER LONG-TERM LIABILITIES
Level 2:
Foreign exchange forwards and options⁽¹⁾	$	611	$	611	$	—	$	51	$	51	$	—
Embedded derivatives	11		5		6		3		1		2
TOTAL	$	622	$	616	$	6	$	54	$	52	$	2

(1)

If the foreign exchange derivative instruments had been netted on the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $50 million as of May 31, 2019. As of that date, the Company had received $289 million of cash collateral from various counterparties related to foreign exchange derivative instruments. No amount of collateral was posted on the Company's derivative liability balance as of May 31, 2019.

No transfers among the levels within the fair value hierarchy occurred during the years ended May 31, 2020 or 2019.

For additional information related to the Company's derivative financial instruments, refer to Note 14 — Risk Management and Derivatives. For fair value information regarding Notes payable and Long-term debt, refer to Note 7 — Short-Term Borrowings and Credit Lines and Note 8 — Long-Term Debt, respectively. The carrying amounts of other current financial assets and other current financial liabilities approximate fair value.

NON-RECURRING FAIR VALUE MEASUREMENTS

As further discussed in Note 20 — Acquisitions and Divestitures, the Company met the criteria to recognize the related assets and liabilities of its Brazil, Argentina, Chile and Uruguay entities as held-for-sale in the third quarter of fiscal 2020 and the classification of these balances remain as such, as of May 31, 2020. This required the Company to remeasure the disposal groups at fair value, less costs to sell, which is considered a Level 3 fair value measurement and was based on each transaction's estimated consideration at the date of close. The carrying value of the Argentina, Chile and Uruguay disposal groups exceeded their fair value, less costs to sell and as a result, the Company recognized a non-recurring impairment charge of $405 million. This charge was primarily due to the anticipated release of non-cash cumulative foreign currency translation losses which were included as part of the carrying value of the Argentina, Chile and Uruguay disposal groups when measuring for impairment. For the fiscal year ended May 31, 2020, the charge was recognized in Other (income) expense, net on the Consolidated Statements of Income, classified within Corporate, and a corresponding allowance within Accrued Liabilities on the Consolidated Balance Sheets.

All other assets or liabilities required to be measured at fair value on a non-recurring basis as of May 31, 2020 were immaterial. As of May 31, 2019, all assets or liabilities required to be measured at fair value on a non-recurring basis were immaterial.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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