DERIVATIVES
 6 Months Ended
Apr. 30, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVES
DERIVATIVES
We are exposed to foreign currency exchange rate fluctuations and interest rate changes in the normal course of our business. As part of our risk management strategy, we use derivative instruments, primarily forward contracts and purchased options, to hedge economic and/or accounting exposures resulting from changes in foreign currency exchange rates.
Cash Flow Hedges
We enter into foreign exchange contracts to hedge our forecasted operational cash flow exposures resulting from changes in foreign currency exchange rates. These foreign exchange contracts, carried at fair value, have maturities between one and twelve months. These derivative instruments are designated and qualify as cash flow hedges under the criteria prescribed in the authoritative guidance. Ineffectiveness in the three and six months ended April 30, 2017 and 2016 was not significant.
Other Hedges
Additionally, we enter into foreign exchange contracts to hedge monetary assets and liabilities that are denominated in currencies other than the functional currency of our subsidiaries. These foreign exchange contracts are carried at fair value and do not qualify for hedge accounting treatment and are not designated as hedging instruments.
Our use of derivative instruments exposes us to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. We do, however, seek to mitigate such risks by limiting our counterparties to major financial institutions that are selected based on their credit ratings and other factors. We have established policies and procedures for mitigating credit risk that include establishing counterparty credit limits, monitoring credit exposures, and continually assessing the creditworthiness of counterparties.
A number of our derivative agreements contain threshold limits to the net liability position with counterparties and are dependent on our corporate credit rating determined by the major credit rating agencies. The counterparties to the derivative instruments may request collateralization, in accordance with derivative agreements, on derivative instruments in net liability positions.
The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position as of April 30, 2017 was $1 million. The credit-risk-related contingent features underlying these agreements had not been triggered as of April 30, 2017.
There were 137 foreign exchange forward contracts open as of April 30, 2017 that were designated as cash flow hedges. There were 63 foreign exchange forward contracts as of April 30, 2017 that were not designated as hedging instruments. The aggregated notional amounts by currency and designation as of April 30, 2017 were as follows:
 
 
Derivatives in Cash Flow
Hedging Relationships
 
Derivatives Not Designated as Hedging Instruments
 
 
Forward
Contracts
 
Forward
Contracts
Currency
 
Buy/(Sell)
 
Buy/(Sell)
 
 
(in millions)
Euro
 
$
—

 
$
46

British Pound
 
—

 
(1
)
Singapore Dollar
 
9

 
1

Malaysian Ringgit
 
71

 
(7
)
Japanese Yen
 
(78
)
 
(40
)
Other currencies
 
(15
)
 
4

Total
 
$
(13
)
 
$
3

 
Derivative instruments are subject to master netting arrangements and are disclosed gross in the balance sheet in accordance with the authoritative guidance. The gross fair values and balance sheet location of derivative instruments held in the condensed consolidated balance sheet as of April 30, 2017 and October 31, 2016 were as follows:
Fair Values of Derivative Instruments
Asset Derivatives
 
Liability Derivatives
 
 
Fair Value
 
 
 
Fair Value
Balance Sheet Location
 
April 30,
2017
 
October 31,
2016
 
Balance Sheet Location
 
April 30,
2017
 
October 31,
2016
(in millions)
Derivatives designated as hedging instruments:
 
 

 
 

 
 
 
 

 
 

Cash flow hedges
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
 
 
 
 
 
 
 
 
 
 
Other current assets
 
$
4

 
$
2

 
Other accrued liabilities
 
$
2

 
$
4

Derivatives not designated as hedging instruments:
 
 

 
 

 
 
 
 

 
 

Foreign exchange contracts
 
 

 
 

 
 
 
 

 
 

Other current assets
 
1

 
2

 
Other accrued liabilities
 
—

 
4

Total derivatives
 
$
5

 
$
4

 
 
 
$
2

 
$
8


The effect of derivative instruments for foreign exchange contracts designated as hedging instruments and not designated as hedging instruments in our condensed consolidated statement of operations was as follows:
 
Three Months Ended
 
Six Months Ended
 
April 30,
 
April 30,
 
2017
 
2016
 
2017
 
2016
 
(in millions)
Derivatives designated as hedging instruments:
 

 
 

 
 
 
 
Cash Flow Hedges
 
 
 
 
 
 
 
Foreign exchange contracts:
 
 
 
 
 
 
 
Gain (loss) recognized in accumulated other comprehensive income
$
(1
)
 
$
(3
)
 
$
2

 
$
(1
)
Gain (loss) reclassified from accumulated other comprehensive income into cost of sales
$
(1
)
 
$
(3
)
 
$
(2
)
 
$
(7
)
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
Gain (loss) recognized in other income (expense), net
$
—

 
$
—

 
$
2

 
$
(2
)
The estimated amount of existing net gain at April 30, 2017 expected to be reclassified from accumulated other comprehensive income to cost of sales within the next twelve months is $1 million.