XML 39 R23.htm IDEA: XBRL DOCUMENT
v3.24.2

Derivative and Hedging Instruments | 6 Months Ended
--- | ---
Jun. 30, 2024
Foreign Currency Derivatives [Abstract] |
Derivative and Hedging Instruments | Derivative and Hedging Instruments The Company monitors and manages its foreign currency and interest rate exposures as part of its overall risk management program, which focuses on the unpredictability of financial markets and seeks to reduce the potentially adverse effects that the volatility of these markets may have on its operating results. A primary objective of the Company’s risk management strategies is to reduce the financial impact that may arise from volatility in foreign currency exchange rates principally through the use of both foreign exchange derivative contracts and foreign currency denominated debt. In addition, the Company may enter into interest rate derivative contracts to manage the effects of interest rate movements on the Company’s aggregate liability portfolio, including potential future debt issuances. The Company does not enter into derivatives for speculative purposes. Cash Flow Hedges The Company may enter into foreign exchange derivative contracts, including forwards and options, to manage the impact of foreign currency variability on anticipated revenues and expenses, which fluctuate based on currencies other than the functional currency of the entity. The objective of these hedging activities is to reduce the effect of movement in foreign exchange rates for a portion of revenues and expenses forecasted to occur. As these contracts are designated as cash flow hedging instruments, gains and losses resulting from changes in fair value of these contracts are deferred in accumulated other comprehensive income (loss) and subsequently reclassified to the consolidated statement of operations when the underlying hedged transactions impact earnings. The terms of these contracts are for generally less than 18 months. In April 2024, the Company entered into foreign exchange derivative contracts to hedge its exposure to variability in cash flows related to foreign denominated assets. Gains and losses resulting from changes in fair value of these contracts are deferred in accumulated other comprehensive income (loss) and reclassified to the consolidated statement of operations when the hedged transactions impact earnings. Forward points are excluded from the effectiveness assessment and are amortized to general and administrative expenses on the consolidated statement of operations over the hedge period. The maximum term of these contracts was for approximately 7 years. In addition, the Company may enter into interest rate derivative contracts to manage the effects of interest rate movements on the Company’s aggregate liability portfolio, including potential future debt issuances, and designate such derivatives as hedging instruments in a cash flow hedging relationship. Gains and losses resulting from changes in fair value of these contracts are deferred in accumulated other comprehensive income (loss) and are subsequently reclassified as an adjustment to interest expense over the respective terms of the hedged debt issuances. Fair Value Hedges The Company may enter into interest rate derivative contracts, including interest rate swaps, to manage the effects of interest rate movements on the fair value of the Company's fixed-rate debt and designate such derivatives as hedging instruments in a fair value hedging relationship. Changes in fair value of these contracts and changes in fair value of fixed-rate debt attributable to changes in the hedged benchmark interest rate generally offset each other and are recorded in interest expense on the consolidated statement of operations. Gains and losses related to the net settlements of interest rate swaps are also recorded in interest expense on the consolidated statement of operations. The periodic cash settlements are included in operating activities on the consolidated statement of cash flows. In 2021, the Company entered into an interest rate swap designated as a fair value hedge related to $1.0 billion of the 3.850% Senior Notes due March 2050. In effect, the interest rate swap synthetically converts the fixed interest rate on this debt to a variable interest rate based on the Secured Overnight Financing Rate (“SOFR”) Overnight Index Swap Rate. The net impacts to interest expense for the three and six months ended June 30, 2024 and 2023 were not material. Net Investment Hedges The Company may use foreign currency denominated debt and/or foreign exchange derivative contracts to hedge a portion of its net investment in foreign subsidiaries against adverse movements in exchange rates. The effective portion of the net investment hedge is recorded as a currency translation adjustment in accumulated other comprehensive income (loss). Forward points are excluded from the effectiveness assessment and are amortized to general and administrative expenses on the consolidated statement of operations over the hedge period. The amounts recognized in earnings related to forward points for the three and six months ended June 30, 2024 and 2023 were not material. As of June 30, 2024 and December 31, 2023, the Company had €1.7 billion and €1.6 billion euro-denominated debt outstanding designated as hedges of a portion of its net investment in its European operations. In December 2023, the Company de-designated €109 million of the euro-denominated debt as net investment hedges to effectively manage changes in its net investment exposures in foreign subsidiaries. The euro-denominated debt was subsequently re-designated as a net investment hedge effective April 2024. For the three and six months ended June 30, 2024 and 2023, the Company recorded pre-tax net foreign currency gains (losses) of $14 million and $58 million and $(4) million and $(39) million, respectively, in other comprehensive income (loss). As of June 30, 2024 and December 31, 2023, the Company had net foreign currency gains of $219 million and $181 million, after tax, respectively, in accumulated other comprehensive income (loss) associated with this hedging activity. Non-designated Derivatives The Company may also enter into foreign exchange derivative contracts to serve as economic hedges, such as to offset possible changes in the value of monetary assets and liabilities due to foreign exchange fluctuations, without designating these derivative contracts as hedging instruments. In addition, the Company is subject to foreign exchange risk as part of its daily settlement activities. This risk is typically limited to a few days between when a payment transaction takes place and the subsequent settlement with customers. To manage this risk, the Company may enter into short duration foreign exchange derivative contracts based upon anticipated receipts and disbursements for the respective currency position. The objective of these activities is to reduce the Company’s exposure to volatility arising from gains and losses resulting from fluctuations of foreign currencies against its functional currencies. Gains and losses resulting from changes in fair value of these contracts are recorded in general and administrative expenses on the consolidated statement of operations, net, along with the foreign currency gains and losses on monetary assets and liabilities. The following table summarizes the fair value of the Company’s derivative financial instruments and the related notional amounts:
|  | June 30, 2024 |  | December 31, 2023
|  | Notional |  | Derivative assets |  | Derivative liabilities |  | Notional |  | Derivative assets |  | Derivative liabilities
|  | (in millions)
Derivatives designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts in a cash flow hedge 1 |  | $ | 4,061 |  |  | $ | 95 |  |  | $ | 6 |  |  | $ | 1,006 |  |  | $ | 2 |  |  | $ | 25 |
Interest rate contracts in a fair value hedge 2 |  | 1,000 |  |  | — |  |  | 83 |  |  | 1,000 |  |  | — |  |  | 79 |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts 1 |  | 2,184 |  |  | 18 |  |  | 7 |  |  | 5,424 |  |  | 34 |  |  | 79 |
Total derivative assets/liabilities |  | $ | 7,245 |  |  | $ | 113 |  |  | $ | 96 |  |  | $ | 7,430 |  |  | $ | 36 |  |  | $ | 183 |
1 Foreign exchange derivative assets and liabilities are included within prepaid expenses and other current assets, other assets, and other current liabilities on the consolidated balance sheet. 2 Interest rate derivative liabilities are included within other current liabilities and other liabilities on the consolidated balance sheet. The pre-tax gain (loss) related to the Company's derivative financial instruments designated as hedging instruments are as follows:
|  | Gain (Loss) Recognized in Other Comprehensive Income (Loss) |  |  |  | Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss)
|  | Three Months Ended June 30, |  | Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Earnings |  | Three Months Ended June 30,
|  | 2024 |  | 2023 |  |  | 2024 |  | 2023
|  | (in millions) |  |  | (in millions)
Derivative financial instruments in a cash flow hedge relationship: |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts 1 |  | $ | 91 |  |  | $ | (14) |  |  | Net revenue |  | $ | 3 |  |  | $ | (8) |
|  |  |  |  |  | General and administrative 2 |  | $ | 66 |  |  | $ | — |
Interest rate contracts |  | $ | — |  |  | $ | — |  |  | Interest expense |  | $ | (1) |  |  | $ | (1) |
Derivative financial instruments in a net investment hedge relationship: |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  | $ | (12) |  |  | $ | (7) |  |  |  |  |  |  |
1 Includes immaterial amounts excluded from the effectiveness assessment recognized in other comprehensive income (loss). 2 Includes immaterial amounts excluded from the effectiveness assessment recognized in earnings.
|  | Gain (Loss) Recognized in Other Comprehensive Income (Loss) |  |  |  | Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss)
|  | Six Months Ended June 30, |  | Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Earnings |  | Six Months Ended June 30,
|  | 2024 |  | 2023 |  |  | 2024 |  | 2023
|  | (in millions) |  |  | (in millions)
Derivative financial instruments in a cash flow hedge relationship: |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts 1 |  | $ | 113 |  |  | $ | (24) |  |  | Net revenue |  | $ | — |  |  | $ | (14) |
|  |  |  |  |  | General and administrative 2 |  | $ | 66 |  |  | $ | — |
Interest rate contracts |  | $ | — |  |  | $ | — |  |  | Interest expense |  | $ | (3) |  |  | $ | (3) |
Derivative financial instruments in a net investment hedge relationship: |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  | $ | (9) |  |  | $ | (46) |  |  |  |  |  |  |
1 Includes immaterial amounts excluded from the effectiveness assessment recognized in other comprehensive income (loss). 2 Includes immaterial amounts excluded from the effectiveness assessment recognized in earnings. The Company estimates that the pre-tax amount of the net deferred loss on cash flow hedges recorded in accumulated other comprehensive income (loss) at June 30, 2024 that will be reclassified into the consolidated statement of operations within the next 12 months is not material. The amount of gain (loss) recognized on the consolidated statement of operations for non-designated derivative contracts is summarized below:
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
|  | 2024 |  | 2023 |  | 2024 |  | 2023
|  | (in millions)
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |
Foreign exchange contracts |  |  |  |  |  |  |  |
General and administrative |  | $ | (1) |  |  | $ | 10 |  |  | $ | 71 |  |  | $ | 25 |
The Company’s derivative financial instruments are subject to both market and counterparty credit risk. Market risk is the potential for economic losses to be incurred on market risk sensitive instruments arising from adverse changes in market factors such as foreign currency exchange rates, interest rates and other related variables. Counterparty credit risk is the risk of loss due to failure of the counterparty to perform its obligations in accordance with contractual terms. The Company’s derivative contracts are subject to enforceable master netting arrangements, which contain various netting and setoff provisions. However, the Company has elected to present derivative assets and liabilities on a gross basis on the consolidated balance sheet. To mitigate counterparty credit risk, the Company enters into derivative contracts with a diversified group of selected financial institutions based upon their credit ratings and other factors. Generally, the Company does not obtain collateral related to derivatives because of the high credit ratings of the counterparties.

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_ForeignCurrencyDerivativesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration