v3.25.2
Derivative Financial Instruments and Hedging Activities
 9 Months Ended
May 31, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments and Hedging Activities Derivative Financial Instruments and Hedging Activities
The Company is directly and indirectly affected by changes in certain market conditions. These changes in market conditions may adversely impact the Company’s financial performance and are referred to as market risks. The Company, where deemed appropriate, uses derivatives as risk management tools to mitigate the potential impact of certain market risks. The primary market risks managed by the Company through the use of derivative instruments are foreign currency risk and interest rate risk.
All derivative instruments are recorded gross on the Condensed Consolidated Balance Sheets at their respective fair values. Changes in fair value of derivative instruments are recorded in the Condensed Consolidated Statements of Operations, or as a component of AOCI in the Condensed Consolidated Balance Sheets, as discussed below.
Foreign Currency Risk Management
The Company enters into forward foreign exchange contracts to manage the foreign currency risk associated with the anticipated foreign currency denominated revenues and expenses.
Cash Flow Hedges
The Company enters into forward foreign exchange contracts to effectively lock in the value of anticipated foreign currency denominated revenues and expenses against foreign currency fluctuations. The related forward foreign exchange contracts have been designated as hedging instruments and are accounted for as cash flow hedges. The effective portion of the gain or loss on cash flow hedges is initially reported as a component of AOCI, net of tax, and is subsequently reclassified into the line item within the Condensed Consolidated Statements of Operations in which the hedged items are recorded, in the same period in which the hedged item affects earnings. The gains and losses recognized in earnings due to hedge ineffectiveness and the amount excluded from effectiveness testing are included as components of net revenue, cost of revenue and selling, general and administrative expense, which are the same line items in which the hedged items are recorded. The aggregate notional amount of these outstanding contracts as of May 31, 2025, and August 31, 2024, was $263 million and $353 million, respectively. The anticipated foreign currency denominated revenues and expenses being hedged are expected to occur between June 1, 2025, and February 28, 2026.
Net Investment Hedges
In addition, the Company has entered into forward foreign exchange contracts to hedge a portion of its net investment in foreign currency denominated operations, which are designated as net investment hedges. The effective portion of the gain or loss is included in change in foreign currency translation in OCI to offset the change in the carrying value of the net investment being hedged until the complete or substantially complete liquidation of the hedged foreign operation. The gains and losses recognized in earnings due to hedge ineffectiveness and the amounts excluded from effectiveness testing are included in interest expense, net. The maturity dates and aggregate notional amount of these outstanding contracts are as follows (in millions):
Maturity dateMay 31, 2025August 31, 2024
October 2024$— $140 
January 2025— 106 
July 2025135 55 
October 2025101 — 
January 2026109 106 
April 202642 — 
Total$387 $407 
Non-Designated Derivatives
In addition to derivatives that are designated as hedging instruments and qualify for hedge accounting, the Company also enters into forward foreign exchange contracts to economically hedge transactional exposure associated with commitments arising from trade accounts receivable, trade accounts payable, fixed purchase obligations and intercompany transactions denominated in a currency other than the functional currency of the respective operating entity. The gains and losses from changes in fair values are recognized immediately in current earnings. The aggregate notional amount of these outstanding contracts as of May 31, 2025, and August 31, 2024, was $2.7 billion and $2.6 billion, respectively.
The Effect of Derivative Instruments on AOCI and the Condensed Consolidated Statements of Operations
The following table sets forth the gains and losses of the Company's derivative instruments designated as cash flow hedges and net investment hedges in OCI, and not designated as hedging instruments in the Condensed Consolidated Statements of Operations for the periods presented (in millions):
Three months endedNine months ended
Financial Statement Line ItemMay 31, 2025May 31, 2024May 31, 2025May 31, 2024
Derivative instruments designated as cash flow hedges:
Gains (losses) recognized in OCI(1)
$15 $— $4 $(4)
Gains (losses) reclassified from AOCI into earnings(1)(2)
Forward foreign exchange contractsCost of revenue$— $— $20 $15 
Interest rate contractsInterest expense, net$— $(1)$(2)$(2)
Derivative instruments designated as net investment hedges:
(Losses) gains recognized in OCI(1)
$(36)$5 $(8)$5 
Gains reclassified from AOCI into earnings(1)
Gain from the divestiture of businesses$— $— $— $(4)
Derivative instruments not designated as hedging instruments:
(Losses) gains recognized in earnings from forward foreign exchange contractsCost of revenue$(10)$— $(36)$7 
Gains (losses) recognized in earnings from changes in foreign currencyCost of revenue$1 $(1)$4 $(36)
(1)Amounts are net of tax, which are immaterial for the three months and nine months ended May 31, 2025, and May 31, 2024.
(2)The Company expects to reclassify $16 million into earnings during the next twelve months, which will primarily be classified as a component of cost of revenue.
The gains and losses recognized in earnings due to amounts excluded from effectiveness testing were not material for all periods presented.
Refer to Note 18 – “Fair Value Measurements” for the fair values and classification of the Company’s derivative instruments.
Interest Rate Risk Management
The Company periodically enters into interest rate swaps to manage interest rate risk associated with the Company’s borrowings or anticipated debt issuances.
In March 2025, the Company entered into forward interest rate swap transactions to hedge the fixed interest rate payments for an anticipated debt issuance or the contractually specified SOFR interest rates for anticipated term loan borrowings. The forward interest rate swaps have an aggregate notional amount of $100 million and have been designated as hedging instruments and accounted for as cash flow hedges. The forward interest rate swaps are scheduled to expire on July 31, 2026. If the anticipated debt issuance or term loan borrowings occurs before July 31, 2026, the contracts will be terminated simultaneously with the debt issuance or term loan borrowings. The contracts will be settled with the respective counterparties on a net basis at the time of termination or expiration. Changes in the fair value of the forward interest rate swap transactions are recorded on the Condensed Consolidated Balance Sheets as a component of AOCI.