Cash collateral received

  
The effect on the Consolidated Statements of Operations of derivative instruments not designated as hedges is summarized as follows (in millions):

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|   |  |   |  | GAINS (LOSSES) FOR THE YEARS ENDED |
| Derivatives Not Designated as Hedging Instruments |  | Line Item in Statements of Operations |  | July 30, 2022 |  | July 31, 2021 |  | July 25, 2020 |
| Foreign currency derivatives |  | Other income (loss), net |  | $ | (237) |  |  | $ | 2  |  |  | $ | (5) |  |
| Total return swaps—deferred compensation |  | Operating expenses and other |  | (92) |  |  | 157  |  |  | 15  |  |
| Equity derivatives |  | Other income (loss), net |  | 9  |  |  | 20  |  |  | 9  |  |
| Total |  |  |  | $ | (320) |  |  | $ | 179  |  |  | $ | 19  |  |

The notional amounts of our outstanding derivatives are summarized as follows (in millions):

|  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |
|  | July 30, 2022 |  | July 31, 2021 |
| Foreign currency derivatives | $ | 4,521  |  |  | $ | 4,139  |  |
| Interest rate derivatives | 1,500  |  |  | 2,000  |  |
| Total return swaps—deferred compensation | 651  |  |  | 730  |  |
| Total | $ | 6,672  |  |  | $ | 6,869  |  |

(b)Offsetting of Derivative InstrumentsWe present our derivative instruments at gross fair values in the Consolidated Balance Sheets. However, our master netting and other similar arrangements with the respective counterparties allow for net settlement under certain conditions, which are designed to reduce credit risk by permitting net settlement with the same counterparty.To further limit credit risk, we also enter into collateral security arrangements related to certain derivative instruments whereby cash is posted as collateral between the counterparties based on the fair market value of the derivative instrument. Under these collateral security arrangements, the net cash collateral provided for was $14 million as of July 30, 2022 and the net cash collateral received was $109 million as of July 31, 2021. Including the effects of collateral, this results in a net derivative asset of $3 million and a net derivative liability of $3 million as of July 30, 2022 and July 31, 2021, respectively.(c)Foreign Currency Exchange RiskWe conduct business globally in numerous currencies. Therefore, we are exposed to adverse movements in foreign currency exchange rates. To limit the exposure related to foreign currency changes, we enter into foreign currency contracts. We do not enter into such contracts for speculative purposes.We hedge forecasted foreign currency transactions related to certain revenues, operating expenses and service cost of sales with currency options and forward contracts. These currency options and forward contracts, designated as cash flow hedges, generally have maturities of less than 24 months. The derivative instrument’s gain or loss is initially reported as a component of accumulated other comprehensive income (AOCI) and subsequently reclassified into earnings when the hedged exposure affects earnings.We enter into foreign exchange forward and option contracts to reduce the short-term effects of foreign currency fluctuations on assets and liabilities such as foreign currency receivables, long-term customer financings and payables. These derivatives are not designated as hedging instruments. Gains and losses on the contracts are included in other income (loss), net, and substantially offset foreign exchange gains and losses from the remeasurement of intercompany balances, other current assets, or liabilities denominated in currencies other than the functional currency of the reporting entity.We hedge certain net investments in our foreign operations with forward contracts to reduce the effects of foreign currency fluctuations on our net investment in those foreign subsidiaries. These derivative instruments generally have maturities of up to six months.88
