Hedging Activities

3 Months Ended

Jun. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Hedging Activities Disclosure [Text Block]

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

Prior to the acquisition of Celesio, the majority of our operations were conducted in U. S. dollars; however, certain assets and liabilities, revenues and expense and purchasing activities were incurred in and exposed to other currencies. We have established certain foreign currency rate risk programs that manage the impact of foreign currency fluctuation. These programs are utilized on a transactional basis when we consider there to be a risk in fair value or volatility in cash flows. These programs reduce but do not entirely eliminate foreign currency rate risk.

Historically, we have entered into forward contracts and a foreign currency option to hedge against cash flows denominated primarily in Canadian dollars, Euros and British pounds. At June 30, 2014 and March 31, 2014, forward contracts having a total notional value of $463 million were designated for hedge accounting. These contracts will mature between March 2015 and March 2020. Changes in the fair values for contracts designated for hedge accounting are recorded to 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 first quarters of 2015 and 2014. Changes in the fair values for contracts not designated for hedge accounting are recorded directly to earnings; amounts recorded to earnings for these contracts were not material during the first quarter of 2014. All forward contracts were designated for hedge accounting during the first quarter of 2015.

Celesio has a number of forward contracts to hedge against cash flows denominated primarily in British pounds and other European currencies. These contracts will mature from July 2014 to June 2015. None of these contracts were designated for hedge accounting and accordingly, changes in the fair value of these contracts are recorded directly in earnings. At June 30, 2014 and March 31, 2014, the total notional values of these contracts were $1,449 million and $1,091 million. Amounts recorded to earnings were not material during the first quarter of 2015.

Interest rate risk

Celesio also has interest rate swaps to hedge the interest rate risk associated with Celesio’s variable rate debt. Interest rate swaps are used to modify the market risk exposures in connection with the variable rate debt to achieve primarily Euro dollar fixed rate interest expense. The interest rate swap transactions generally involve the exchange of floating or fixed interest payments. The interest rate swaps will mature through September 2014. These contracts are not designated for hedge accounting and, accordingly, changes in the fair value of the swaps are recorded directly in earnings. At June 30, 2014 and March 31, 2014, the total gross notional values of these contracts were $68 million and $96 million. Amounts recorded to earnings were not material during the first quarter of 2015.

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

	Balance Sheet Caption	June 30, 2014						March 31, 2014
		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	$	2	$	—	$	64	$	4	$	—	$	64
Foreign exchange  contracts (non-current)	Other assets	15		—		399		27		—		399
Total		$	17	$	—			$	31	$	—
Derivatives not designated for hedge accounting
Foreign exchange  contracts (current)	Prepaid expenses and other	$	2	$	—	$	174	$	2	$	—	$	255
Foreign exchange  contracts (current)	Other accrued liabilities	—		26		1,275		—		13		836
Interest rate swap contracts (current)	Other accrued liabilities	—		—		68		—		1		96
Total		$	2	$	26			$	2	$	14

Refer to Financial Note 11, "Fair Value Measurements," for more information on these recurring fair value measurements.