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PARTII
Note17Risk Management and Derivatives
The following table presents the fair values of derivative instruments included within the consolidated balance sheet as of May31,2011 and 2010:
(Inmillions)
Asset Derivatives Liability Derivatives
BalanceSheet
Location May31,2011 May31,2010 BalanceSheet Location May31,2011 May31,2010
Derivatives formally designated
as hedging instruments:
Foreign exchange forwards
andoptions
Prepaid expenses
and other
currentassets $ 22 $ 316 Accruedliabilities $ 170 $ 25
Foreign exchange forwards
andoptions
Deferred income
taxes and other
long-term assets 7 —
Deferredincome
taxes and other
long-termliabilities 10 —
Interest rate swap contracts
Deferred income
taxes and other
long-term assets 15 15
Deferred income
taxes and other
long-termliabilities — —
Total derivatives formally
designated ashedging
instruments 44 331 180 25
Derivatives not designated
ashedging instruments:
Foreign exchange forwards
andoptions
Prepaid expenses
and other
currentassets $ 9 $ 104 Accrued liabilities $ 16 $ 139
Foreign exchange forwards
andoptions
Deferred income
taxes and other
long-term assets — —
Deferred income
taxes and other
long-termliabilities 1 1
Total derivatives not designated
ashedginginstruments 9 104 17 140
TOTAL DERIVATIVES $ 53 $ 435 $ 197 $ 165
The following tables present the amounts affecting the consolidated statements of income foryears ended May31,2011,2010 and 2009:
Derivatives formally designated
(Inmillions)
Amount of Gain (Loss)
Recognized in Other
Comprehensive Income
onDerivatives(1)
Amount of Gain (Loss)
Reclassifi ed From Accumulated
OtherComprehensive Income into Income(1)
YearEnded May31, Location of Gain (Loss)
Reclassifi ed From Accumulated
Other Comprehensive Income
IntoIncome(1)
YearEnded May31,
2011 2010 2009 2011 2010 2009
Derivatives designated as cash fl ow hedges:
Foreign exchange forwards and options $ (87) $ (30) $ 106 Revenue $ (30) $ 51 $ 93
Foreign exchange forwards and options (152) 89 350 Cost of sales 103 60 (14)
Foreign exchange forwards and options (4) 5 — Selling and administrative expense 1 1 1
Foreign exchange forwards and options (65) 51 165 Other (income), net 34 56 68
Total designated cash fl ow hedges $ (308) $ 115 $ 621 $ 108 $ 168 $ 148
Derivatives designated as net investment hedges:
Foreign exchange forwards and options $ (85) $ 66 $ 161 Other(income), net $ — $ — $ —
(1) For the year ended May31,2011 and 2009, the Company recorded an immaterial amount of ineffectiveness from cash flow hedges in other (income), net. For the year ended May31,2010,
$5million of ineffectiveness from cash flow hedges was recorded in other (income), net.
(Inmillions)
Amount of Gain (Loss) Recognized
inIncome on Derivatives
Location of Gain (Loss) Recognized
inIncome on Derivatives
YearEnded May31,
2011 2010 2009
Derivatives designated as fair value hedges:
Interest rate swaps(1) $ 6 $ 7 $ 2 Interestexpense(income),net
Derivatives not designated as hedging instruments:
Foreign exchange forwards and options $ (30) $ (91) $ (83) Other (income), net
(1) All interest rate swap agreements meet the shortcut method requirements under the accounting standards for derivatives and hedging. Accordingly, changes in the fair values of the interest
rate swap agreements are exactly offset by changes in the fair value of the underlying long-term debt. Refer to section “Fair Value Hedges” for additional detail.
Refer to Note5— Accrued Liabilities for derivative instruments recorded in
accrued liabilities, Note6 —Fair Value Measurements for a description of how
the above fi nancial instruments are valued, Note14— Accumulated Other
Comprehensive Income and the consolidated statements of shareholders’
equity for additional information on changes in other comprehensive income
for theyears ended May31,2011,2010 and 2009.