Hedging Activities

9 Months Ended

Dec. 31, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Hedging Activities

Hedging Activities

In the normal course of business, we are exposed to interest rate changes and foreign currency fluctuations. At times, we limit these risks through the use of derivatives such as interest rate swaps and forward foreign exchange contracts. In accordance with our policy, derivatives are only used for hedging purposes. We do not use derivatives for trading or speculative purposes.

Foreign currency rate risk

We conduct our business worldwide in U.S. dollars and the functional currencies of our foreign subsidiaries, including Euro, British pounds and Canadian dollars. Changes in foreign exchange rates will affect our results of operations, assets and liabilities, capital ratios and purchasing activities that are reported in U.S. dollars. We have certain foreign currency rate risk programs that manage the impact of foreign currency fluctuations primarily through the use of foreign currency forward-exchange contracts. These contracts are typically used to offset the potential earnings effects from intercompany foreign currency loans. These programs reduce but do not entirely eliminate foreign currency rate risk.

At December 31, 2015 and March 31, 2015, forward contracts to hedge the U.S. dollar against cash flows denominated in Canadian dollars with total notional values of $399 million were designated for hedge accounting. These contracts will mature between March 2016 and March 2020. Changes in the fair values of contracts designated for hedge accounting are recorded into accumulated other comprehensive income and reclassified into earnings in the same period in which the hedged transaction affects earnings; amounts recorded to earnings for these contracts were not material during the quarters and nine months ended December 31, 2015 and 2014.

We also have a number of forward contracts to primarily hedge the Euro against cash flows denominated in British pounds and other European currencies. At December 31, 2015 and March 31, 2015, the total notional value of these contracts was $1,878 million and $1,755 million. These contracts will mature through June 2016 and none of these contracts were designated for hedge accounting. Changes in the fair values of contracts not designated for hedge accounting are recorded directly into earnings and accordingly, net losses of $24 million and $2 million for the third quarter and first nine months of 2016 and net losses of $24 million and $74 million for the third quarter and first nine months of 2015 were recorded within operating expenses. However, the gains and losses from these contracts are largely offset by changes in the value of the underlying intercompany foreign currency loans.

Information regarding the fair value of derivatives on a gross basis is as follows:

	Balance Sheet Caption	December 31, 2015						March 31, 2015
		Fair Value of Derivative				U.S. Dollar Notional		Fair Value of Derivative				U.S Dollar Notional
(In millions)		Asset		Liability				Asset		Liability
Derivatives designated for hedge accounting
Foreign exchange contracts (current)	Prepaid expenses and other	$	19	$	—	$	76	$	14	$	—	$	76
Foreign exchange contracts (non-current)	Other assets	75		—		323		53		—		323
Total		$	94	$	—			$	67	$	—
Derivatives not designated for hedge accounting
Foreign exchange contracts (current)	Prepaid expenses and other	$	25	$	—	$	1,162	$	7	$	—	$	493
Foreign exchange contracts (current)	Other accrued liabilities	—		10		716		—		79		1,262
Total		$	25	$	10			$	7	$	79

Refer to Financial Note 12, "Fair Value Measurements," for more information on these recurring fair value measurements.