We use derivative instruments to manage risks related to foreign currencies, interest rates, equity prices, and credit; to enhance investment returns; and to facilitate portfolio diversification. Our objectives for holding derivatives include reducing, eliminating, and efficiently managing the economic impact of these exposures as effectively as possible. Our derivative programs include strategies that both qualify and do not qualify for hedge accounting treatment.

Certain forecasted transactions, assets, and liabilities are exposed to foreign currency risk. We monitor our foreign currency exposures daily to maximize the economic effectiveness of our foreign currency hedge positions.

Foreign currency risks related to certain non-U.S. dollar-denominated investments are hedged using foreign exchange forward contracts that are designated as fair value hedging instruments. Foreign currency risks related to certain Euro-denominated debt are hedged using foreign exchange forward contracts that are designated as cash flow hedging instruments.

Certain options and forwards not designated as hedging instruments are also used to manage the variability in foreign exchange rates on certain balance sheet amounts and to manage other foreign currency exposures.

Interest rate risks related to certain fixed-rate debt are hedged using interest rate swaps that are designated as fair value hedging instruments to effectively convert the fixed interest rates to floating interest rates.

Securities held in our fixed-income portfolio are subject to different interest rate risks based on their maturities. We manage the average maturity of our fixed-income portfolio to achieve economic returns that correlate to certain broad-based fixed-income indices using exchange-traded option and futures contracts and over-the-counter swap and option contracts. These contracts are not designated as hedging instruments and are included in “Other contracts” in the tables below.

Securities held in our equity investments portfolio are subject to market price risk. At times, we may hold options, futures, and swap contracts. These contracts are not designated as hedging instruments and are included in “Other contracts” in the tables below.

Our fixed-income portfolio is diversified and consists primarily of investment-grade securities. We use credit default swap contracts to manage credit exposures relative to broad-based indices and to facilitate portfolio diversification. These contracts are not designated as hedging instruments and are included in “Other contracts” in the tables below.

Certain of our counterparty agreements for derivative instruments contain provisions that require our issued and outstanding long-term unsecured debt to maintain an investment grade credit rating and require us to maintain minimum liquidity of $1.0 billion. To the extent we fail to meet these requirements, we will be required to post collateral, similar to the standard convention related to over-the-counter derivatives. As of March 31, 2022, our long-term unsecured debt rating was AAA, and cash investments were in excess of $1.0 billion. As a result, no collateral was required to be posted.

The following table presents the notional amounts of our outstanding derivative instruments measured in U.S. dollar equivalents:

(In millions)	March 31, 2022		June 30, 2021


Designated as Hedging Instruments

Foreign exchange contracts purchased	$	635	$	635
Foreign exchange contracts sold		0		6,081
Interest rate contracts purchased		1,160		1,247

Not Designated as Hedging Instruments

Foreign exchange contracts purchased		8,151		14,223
Foreign exchange contracts sold		13,929		23,391
Other contracts purchased		2,757		2,456
Other contracts sold		869		763

	Derivative				Derivative		Derivative			Derivative
(In millions)	Assets				Liabilities		Assets			Liabilities


	March 31, 2022						June 30, 2021

Designated as Hedging Instruments

Foreign exchange contracts	$	0		$	(39	)	$	76		$	(8	)
Interest rate contracts		0			(43	)		40			0

Not Designated as Hedging Instruments

Foreign exchange contracts		234			(322	)		227			(291	)
Other contracts		96			(25	)		56			(36	)


Gross amounts of derivatives		330			(429	)		399			(335	)
Gross amounts of derivatives offset in the balance sheet		(175	)		177			(141	)		142
Cash collateral received		0			(175	)		0			(42	)


Net amounts of derivatives	$	155		$	(427	)	$	258		$	(235	)


Reported as

Short-term investments	$	33		$	0		$	78		$	0
Other current assets		167			0			137			0
Other long-term assets		(45	)		0			43			0
Other current liabilities		0			(311	)		0			(182	)
Other long-term liabilities		0			(116	)		0			(53	)


Total	$	155		$	(427	)	$	258		$	(235	)

Gross derivative assets and liabilities subject to legally enforceable master netting agreements for which we have elected to offset were $314 million and $426 million, respectively, as of March 31, 2022, and $395 million and $335 million, respectively, as of June 30, 2021.

The following table presents the fair value of our derivatives instruments on a gross basis:

(In millions)	Level 1			Level 2		Level 3		Total


March 31, 2022

Derivative assets	$	0	$	314		$	16	$	330
Derivative liabilities		0		(429	)		0		(429	)

June 30, 2021

Derivative assets		0		396			3		399
Derivative liabilities		0		(335	)		0		(335	)

Gains (losses) on derivative instruments recognized in other income (expense), net were as follows:

(In millions)	Three Months Ended March 31,							Nine Months Ended March 31,


		2022			2021			2022			2021

Designated as Fair Value Hedging Instruments

Foreign exchange contracts
Derivatives	$	0		$	482		$	49		$	189
Hedged items		0			(474	)		(50	)		(181	)
Excluded from effectiveness assessment		0			7			4			25

Interest rate contracts
Derivatives		(57	)		(41	)		(71	)		(50	)
Hedged items		61			46			83			62

Designated as Cash Flow Hedging Instruments

Foreign exchange contracts
Amount reclassified from accumulated other comprehensive income		(15	)		(26	)		(44	)		15

Not Designated as Hedging Instruments

Foreign exchange contracts		35			(130	)		308			67
Other contracts		(29	)		(17	)		(41	)		(10	)

Gains (losses), net of tax, on derivative instruments recognized in our consolidated comprehensive income statements were as follows:

(In millions)	Three Months Ended March 31,							Nine Months Ended March 31,


	2022			2021				2022			2021

Designated as Cash Flow Hedging Instruments

Foreign exchange contracts
Included in effectiveness assessment	$	(6	)	$	(2	)	$	(27	)	$	43