Benefit recognized in interest expense

[Table of Contents](#i677b09687fd443618b9c84261c8e0734_7)5. DERIVATIVE INSTRUMENTSCash Flow HedgesForeign Currency Forward ContractsWe conduct business outside the U.S. in several currencies including the British Pound Sterling, Euro, Indian Rupee, and Philippine Peso. As such, we are exposed to movements in foreign currency exchange rates. We utilize derivative instruments (foreign currency forward contracts) to manage the exposures related to the effects of foreign exchange rate fluctuations and reduce the volatility of earnings and cash flows associated with changes in foreign currency. Factors considered in the decision to hedge an underlying market exposure include the materiality of the risk, the volatility of the market, the duration of the hedge, the degree to which the underlying exposure is committed to, and the availability, effectiveness, and cost of derivative instruments. Derivative instruments are only utilized for risk management purposes and are not used for speculative or trading purposes. We limit counterparties to credit-worthy financial institutions. Refer to Note 2, Significant Accounting Policies – Concentrations of Credit Risk, for further discussion on counterparty credit risk. In designing a specific hedging approach, we considered several factors, including offsetting exposures, the significance of exposures, the forecasting of risk and the potential effectiveness of the hedge. The gains and losses on foreign currency forward contracts offset the variability in operating expenses associated with currency movements. The changes in fair value for these foreign currency forward contracts are initially reported as a component of Accumulated Other Comprehensive Loss ("AOCL") and subsequently reclassified into Operating expenses when the hedge is settled. There was no discontinuance of foreign currency cash flow hedges during fiscal 2022 or fiscal 2021, and as such, no corresponding gains or losses related to changes in the value of our contracts were reclassified into earnings prior to settlement.As of August 31, 2022, we maintained foreign currency forward contracts to hedge a portion of our exposures related to the British Pound Sterling, Euro, Indian Rupee, and Philippine Peso. We entered into a series of forward contracts to mitigate our currency exposure ranging from 25% to 75% over their respective hedged periods. The current foreign currency forward contracts are set to mature at various points between the first quarter of fiscal 2023 through the fourth quarter of fiscal 2023.The following table summarizes the gross notional value of foreign currency forward contracts to purchase British Pound Sterling, Euros, Indian Rupees and Philippine Pesos with U.S. dollars as of August 31, 2022 and 2021.

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | August 31, 2022 |  | August 31, 2021 |
| (in thousands) | Local Currency Amount | Notional Contract Amount (USD) |  | Local Currency Amount | Notional Contract Amount (USD) |
| British Pound Sterling | £ | 44,200  |  | $ | 55,567  |  |  | £ | 37,700  |  | $ | 51,754  |  |
| Euro | € | 37,500  |  | 40,679  |  |  | € | 33,800  |  | 40,674  |  |
| Indian Rupee | Rs | 2,667,928  |  | 33,600  |  |  | Rs | 2,585,198  |  | 33,800  |  |
| Philippine Peso | ₱ | 1,462,060  |  | 27,000  |  |  | ₱ | 1,414,928  |  | 28,500  |  |
| Total |  | $ | 156,846  |  |  |  | $ | 154,728  |  |

Refer to Foreign Currency Exchange Risk in Part II, Item 7A of this Annual Report on Form 10-K for further discussion of our exposure to foreign exchange rate fluctuations.Swap Agreement2020 Swap AgreementOn March 5, 2020, we entered into an interest rate swap agreement ("2020 Swap Agreement") with a notional amount of $287.5 million. The 2020 Swap Agreement hedged a portion of our then outstanding floating LIBOR rate debt with a fixed interest rate of 0.7995% to mitigate our interest rate exposure. On March 1, 2022, we terminated the 2020 Swap Agreement, which resulted in a one-time benefit of $3.5 million recognized in Interest expense, net in the Consolidated Statements of Income during the third quarter of fiscal 2022, based on its fair market value. 2022 Swap AgreementOn March 1, 2022, we entered into an interest rate swap agreement ("2022 Swap Agreement") with a notional amount of $800.0 million to hedge a portion of our outstanding floating Secured Overnight Financing Rate ("SOFR") rate debt with a fixed 65
