XML 37 R14.htm IDEA: XBRL DOCUMENT
v3.23.3

Fair Value Measurements and Financial Instruments | 9 Months Ended
--- | ---
Sep. 30, 2023
Fair Value Disclosures [Abstract] |
Fair Value Measurements and Financial Instruments |
Note 7. Fair Value Measurements and Financial Instruments
Recurring Fair Value Measurements The following table presents the balances of assets and liabilities measured at fair value on a recurring basis as of September 30, 2023:
(dollars in millions) | Level 1(1) |  | Level 2(2) |  | Level 3(3) |  | Total
Assets: |  |  |  |  |  |  |
Prepaid expenses and other: |  |  |  |  |  |  |
Fixed income securities | $ | — |  |  | $ | 33 |  |  | $ | — |  |  | $ | 33 |
Cross currency swaps | — |  |  | 2 |  |  | — |  |  | 2 |
Interest rate caps | — |  |  | 68 |  |  | — |  |  | 68 |
Other assets: |  |  |  |  |  |  |
Fixed income securities | — |  |  | 236 |  |  | — |  |  | 236 |
Cross currency swaps | — |  |  | 355 |  |  | — |  |  | 355 |
Interest rate caps | — |  |  | 11 |  |  | — |  |  | 11 |
Total | $ | — |  |  | $ | 705 |  |  | $ | — |  |  | $ | 705 |
Liabilities: |  |  |  |  |  |  |
Other current liabilities: |  |  |  |  |  |  |
Interest rate swaps | $ | — |  |  | $ | 1,143 |  |  | $ | — |  |  | $ | 1,143 |
Cross currency swaps | — |  |  | 301 |  |  | — |  |  | 301 |
Foreign exchange forwards | — |  |  | 9 |  |  | — |  |  | 9 |
Interest rate caps | — |  |  | 68 |  |  | — |  |  | 68 |
Contingent consideration | — |  |  | — |  |  | 125 |  |  | 125 |
Other liabilities: |  |  |  |  |  |  |
Interest rate swaps | — |  |  | 4,782 |  |  | — |  |  | 4,782 |
Cross currency swaps | — |  |  | 2,784 |  |  | — |  |  | 2,784 |
Interest rate caps | — |  |  | 11 |  |  | — |  |  | 11 |
Total | $ | — |  |  | $ | 9,098 |  |  | $ | 125 |  |  | $ | 9,223 |
(1)Quoted prices in active markets for identical assets or liabilities. (2)Observable inputs other than quoted prices in active markets for identical assets and liabilities. (3)Unobservable pricing inputs in the market. The following table presents the balances of assets and liabilities measured at fair value on a recurring basis as of December 31, 2022:
(dollars in millions) | Level 1(1) |  | Level 2(2) |  | Level 3(3) |  | Total
Assets: |  |  |  |  |  |  |
Prepaid expenses and other: |  |  |  |  |  |  |
Fixed income securities | $ | — |  |  | $ | 37 |  |  | $ | — |  |  | $ | 37 |
Cross currency swaps | — |  |  | 42 |  |  | — |  |  | 42 |
Foreign exchange forwards | — |  |  | 6 |  |  | — |  |  | 6 |
Interest rate caps | — |  |  | 63 |  |  | — |  |  | 63 |
Other assets: |  |  |  |  |  |  |
Fixed income securities | — |  |  | 349 |  |  | — |  |  | 349 |
Cross currency swaps | — |  |  | 263 |  |  | — |  |  | 263 |
Interest rate caps | — |  |  | 30 |  |  | — |  |  | 30 |
Total | $ | — |  |  | $ | 790 |  |  | $ | — |  |  | $ | 790 |
Liabilities: |  |  |  |  |  |  |
Other current liabilities: |  |  |  |  |  |  |
Interest rate swaps | $ | — |  |  | $ | 731 |  |  | $ | — |  |  | $ | 731 |
Cross currency swaps | — |  |  | 346 |  |  | — |  |  | 346 |
Interest rate caps | — |  |  | 63 |  |  | — |  |  | 63 |
Foreign exchange forwards | — |  |  | 1 |  |  | — |  |  | 1 |
Contingent consideration | — |  |  | — |  |  | 274 |  |  | 274 |
Other liabilities: |  |  |  |  |  |  |
Interest rate swaps | — |  |  | 3,902 |  |  | — |  |  | 3,902 |
Cross currency swaps | — |  |  | 3,295 |  |  | — |  |  | 3,295 |
Interest rate caps | — |  |  | 30 |  |  | — |  |  | 30 |
Contingent consideration | — |  |  | — |  |  | 43 |  |  | 43 |
Total | $ | — |  |  | $ | 8,368 |  |  | $ | 317 |  |  | $ | 8,685 |
(1)Quoted prices in active markets for identical assets or liabilities. (2)Observable inputs other than quoted prices in active markets for identical assets and liabilities. (3)Unobservable pricing inputs in the market. Certain of our equity investments do not have readily determinable fair values and are excluded from the tables above. Such investments are measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer and are included in Investments in unconsolidated businesses in our condensed consolidated balance sheets. As of September 30, 2023 and December 31, 2022, the carrying amount of our investments without readily determinable fair values was $721 million and $804 million, respectively. During both the three and nine months ended September 30, 2023, there were insignificant adjustments due to observable price changes. During both the three and nine months ended September 30, 2023, there were insignificant amounts of impairment charges. As of September 30, 2023, cumulative adjustments due to observable price changes and impairment charges were approximately $159 million and $89 million, respectively. Verizon has a liability for contingent consideration related to its acquisition of TracFone, completed in November 2021. The fair value is calculated using a probability-weighted discounted cash flow model and represents a Level 3 measurement. Level 3 instruments include valuation based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. Subsequent to the Acquisition Date, at each reporting date, the contingent consideration liability is remeasured to fair value. During the nine months ended September 30, 2023 and 2022, we made payments of $182 million and $113 million, respectively, related to the contingent consideration. See Note 3 for additional information. Fixed income securities consist primarily of investments in municipal bonds. The valuation of the fixed income securities is based on the quoted prices for similar assets in active markets or identical assets in inactive markets or models that apply inputs from observable market data. The valuation determines that these securities are classified as Level 2. Derivative contracts are valued using models based on readily observable market parameters for all substantial terms of our derivative contracts and thus are classified within Level 2. We use mid-market pricing for fair value measurements of our derivative instruments. Our derivative instruments are recorded on a gross basis. We recognize transfers between levels of the fair value hierarchy as of the end of the reporting period. Fair Value of Short-term and Long-term Debt The fair value of our debt is determined using various methods, including quoted prices for identical debt instruments, which is a Level 1 measurement, as well as quoted prices for similar debt instruments with comparable terms and maturities, which is a Level 2 measurement. The fair value of our short-term and long-term debt, excluding finance leases, was as follows:
|  |  | Fair Value
(dollars in millions) | Carrying Amount |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
At December 31, 2022 | $ | 148,906 |  |  | $ | 84,385 |  |  | $ | 54,656 |  |  | $ | — |  |  | $ | 139,041 |
At September 30, 2023 | 145,404 |  |  | 79,888 |  |  | 53,470 |  |  | — |  |  | 133,358 |
Derivative Instruments We enter into derivative transactions primarily to manage our exposure to fluctuations in foreign currency exchange rates and interest rates. We employ risk management strategies, which may include the use of a variety of derivatives including interest rate swaps, cross currency swaps, forward starting interest rate swaps, treasury rate locks, interest rate caps, swaptions and foreign exchange forwards. We do not hold derivatives for trading purposes. The following table sets forth the notional amounts of our outstanding derivative instruments:
| At September 30, |  | At December 31,
(dollars in millions) | 2023 |  | 2022
Interest rate swaps | $ | 26,071 |  |  | $ | 26,071 |
Cross currency swaps | 33,526 |  |  | 34,976 |
Foreign exchange forwards | 995 |  |  | 920 |
The following tables summarize the activities of our designated derivatives:
| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(dollars in millions) | 2023 |  | 2022 |  | 2023 |  | 2022
Interest Rate Swaps: |  |  |  |  |  |  |
Notional value entered into | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 7,155 |
Notional value settled | — |  |  | — |  |  | — |  |  | 863 |
Pre-tax gain recognized in Interest expense | 2 |  |  | 2 |  |  | 3 |  |  | 2 |
Cross Currency Swaps: |  |  |  |  |  |  |
Notional value entered into | — |  |  | — |  |  | — |  |  | — |
Notional value settled | — |  |  | — |  |  | 1,450 |  |  | — |
Pre-tax loss recognized in Other comprehensive income (loss)(1) | N/A |  | N/A |  | N/A |  | (430) |
Pre-tax loss on cross currency swaps recognized in Interest expense | (1,036) |  |  | (2,039) |  |  | (311) |  |  | (3,847) |
Pre-tax gain on hedged debt recognized in Interest expense | 1,036 |  |  | 2,039 |  |  | 311 |  |  | 3,847 |
Excluded components recognized in Other comprehensive income (loss) | 809 |  |  | 169 |  |  | 851 |  |  | (171) |
Initial value of the excluded component amortized into Interest expense | 28 |  |  | 27 |  |  | 82 |  |  | 54 |
Forward Starting Interest Rate Swaps: |  |  |  |  |  |  |
Notional value entered into | — |  |  | — |  |  | — |  |  | — |
Notional value settled | — |  |  | — |  |  | — |  |  | 1,000 |
Pre-tax gain recognized in Other comprehensive income (loss) | — |  |  | — |  |  | — |  |  | 196 |
Treasury Rate Locks: |  |  |  |  |  |  |
Notional value entered into | — |  |  | — |  |  | 500 |  |  | — |
Notional value settled | — |  |  | — |  |  | 500 |  |  | — |
Pre-tax gain recognized in Other comprehensive income (loss) | — |  |  | — |  |  | 5 |  |  | — |
N/A - not applicable (1) Represents amounts recorded under the cash flow hedge model. These instruments were re-designated as fair value hedges on March 31, 2022.
| Nine Months Ended
| September 30,
(dollars in millions) | 2023 |  | 2022
Other, net Cash Flows from Operating Activities: |  |  |
Cash received for settlement of interest rate swaps | $ | — |  |  | $ | 40 |
Cash paid for settlement of forward starting interest rate swaps | — |  |  | (107) |
Cash received for settlement of treasury rate locks | 5 |  |  | — |
Other, net Cash Flows from Financing Activities: |  |  |
Cash paid for settlement of cross currency swaps, net | (67) |  |  | — |
The following table displays the amounts recorded in Long-term debt in our condensed consolidated balance sheets related to cumulative basis adjustments for our interest rate swaps designated as fair value hedges. The cumulative amounts exclude cumulative basis adjustments related to foreign exchange risk.
| At September 30, |  | At December 31,
(dollars in millions) | 2023 |  | 2022
Carrying amount of hedged liabilities | $ | 20,398 |  |  | $ | 21,741 |
Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged liabilities | (5,809) |  |  | (4,512) |
Cumulative amount of fair value hedging adjustment remaining for which hedge accounting has been discontinued | 422 |  |  | 488 |
Interest Rate Swaps We enter into interest rate swaps to achieve a targeted mix of fixed and variable rate debt. We principally receive fixed rates and pay variable rates, resulting in a net increase or decrease to Interest expense. These swaps are designated as fair value hedges and hedge against interest rate risk exposure of designated debt issuances. We record the interest rate swaps at fair value in our condensed consolidated balance sheets as assets and liabilities. Changes in the fair value of the interest rate swaps are recorded to Interest expense, which are primarily offset by changes in the fair value of the hedged debt due to changes in interest rates. Cross Currency Swaps We have entered into cross currency swaps previously designated as cash flow hedges through March 31, 2022 to exchange our British Pound Sterling, Euro, Swiss Franc, Canadian Dollar and Australian Dollar-denominated cash flows into U.S. dollars and to fix our cash payments in U.S. dollars, as well as to mitigate the impact of foreign currency transaction gains or losses. A portion of the loss recognized in Other comprehensive income (loss) was reclassified to Interest expense to offset the related pre-tax foreign currency transaction gain or loss on the underlying hedged item. On March 31, 2022, we elected to de-designate our cross currency swaps as cash flow hedges and re-designated these swaps as fair value hedges. For these hedges, we have elected to exclude the change in fair value of the cross currency swaps related to both time value and cross currency basis spread from the assessment of hedge effectiveness (the excluded components). The initial value of the excluded components of $1.0 billion as of March 31, 2022 will continue to be amortized into Interest expense over the remaining life of the hedging instruments. We estimate that $106 million will be amortized into Interest expense within the next 12 months. In addition to the previously mentioned cross currency swaps, we have executed additional cross currency swaps to exchange Euro-denominated cash flows into U.S. dollars to fix our cash payments in U.S. dollars. These swaps are designated as fair value hedges. We record the cross currency swaps at fair value in our condensed consolidated balance sheets as assets and liabilities. Changes in the fair value of the cross currency swaps attributable to changes in the spot rate of the hedged item and changes in the recorded value of the hedged debt due to changes in spot rates are recorded in the same income statement line item. We present exchange gains and losses from the conversion of foreign currency denominated debt as a part of Interest expense. During the three and nine months ended September 30, 2023 and September 30, 2022, these amounts completely offset each other and no net gain or loss was recorded. Changes in the fair value of cross currency swaps attributable to time value and cross currency basis spread are initially recorded to Other comprehensive income (loss). Unrealized gains or losses on excluded components are recorded in Other comprehensive income (loss) and are recognized into Interest expense on a systematic and rational basis through the swap accrual over the life of the hedging instrument. The amount remaining in Accumulated other comprehensive loss related to cash flow hedges on the date of transition will be reclassified to earnings when the hedged item is recognized in earnings or when it becomes probable that the forecasted transactions will not occur. During the three and nine months ended September 30, 2023 and September 30, 2022, the amortization of the initial value of the excluded component completely offset the amortization related to the amount remaining in Other comprehensive income (loss) related to cash flow hedges. See Note 9 for additional information. Forward Starting Interest Rate Swaps From time to time we enter into forward starting interest rate swaps designated as cash flow hedges in order to manage our exposure to interest rate changes on future forecasted transactions. We hedge our exposure to the variability in future cash flows based on the expected maturities of the related forecasted debt issuance. We recognize gains and losses resulting from interest rate movements in Other comprehensive income (loss). Treasury Rate Locks We have entered into treasury rate locks designated as cash flow hedges to mitigate our interest rate risk on future transactions. We recognize gains and losses resulting from interest rate movements in Other comprehensive income (loss). Net Investment Hedges We have designated certain foreign currency debt instruments as net investment hedges to mitigate foreign exchange exposure related to non-U.S. dollar net investments in certain foreign subsidiaries against changes in foreign exchange rates. The notional amount of Euro-denominated debt designated as a net investment hedge was €750 million as of both September 30, 2023 and December 31, 2022. Undesignated Derivatives We also have the following derivative contracts which we use as economic hedges but for which we have elected not to apply hedge accounting. The following table summarizes the activity of our derivatives not designated in hedging relationships:
| Three Months Ended | Nine Months Ended
| September 30, | September 30,
(dollars in millions) | 2023 |  | 2022 |  | 2023 |  | 2022
Foreign Exchange Forwards: |  |  |  |  |  |  |
Notional value entered into | $ | 2,800 |  |  | $ | 2,642 |  |  | $ | 8,225 |  |  | $ | 8,144 |
Notional value settled | 2,785 |  |  | 2,703 |  |  | 8,150 |  |  | 8,136 |
Pre-tax loss recognized in Other income (expense), net | (39) |  |  | (75) |  |  | (17) |  |  | (169) |
Swaptions: |  |  |  |  |  |  |
Notional value sold | — |  |  | — |  |  | — |  |  | 1,000 |
Notional value settled | — |  |  | — |  |  | — |  |  | 1,000 |
Pre-tax loss recognized in Interest expense | — |  |  | — |  |  | — |  |  | (33) |
Foreign Exchange Forwards We enter into British Pound Sterling and Euro foreign exchange forwards to mitigate our foreign exchange rate risk related to non-functional currency denominated monetary assets and liabilities of international subsidiaries. Swaptions We enter into swaptions to achieve a targeted mix of fixed and variable rate debt. Concentrations of Credit Risk Financial instruments that subject us to concentrations of credit risk consist primarily of temporary cash investments, short-term and long-term investments, trade receivables, including device payment plan agreement receivables, certain notes receivable, including lease receivables, and derivative contracts. Counterparties to our derivative contracts are major financial institutions with whom we have negotiated derivatives agreements (ISDA master agreements) and credit support annex (CSA) agreements which provide rules for collateral exchange. The CSA agreements contain rating based thresholds such that we or our counterparties may be required to hold or post collateral based upon changes in outstanding positions as compared to established thresholds and changes in credit ratings. We do not offset fair value amounts recognized for derivative instruments and fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral arising from derivative instruments recognized at fair value. At September 30, 2023, we did not hold any collateral. At September 30, 2023, we posted $2.1 billion of collateral related to derivative contracts under collateral exchange agreements, which was recorded as Prepaid expenses and other in our condensed consolidated balance sheet. At December 31, 2022, we did not hold any collateral. At December 31, 2022, we posted $2.3 billion of collateral related to derivative contracts under collateral exchange arrangements, which was recorded as Prepaid expenses and other in our condensed consolidated balance sheet. While we may be exposed to credit losses due to the nonperformance of our counterparties, we consider the risk remote and do not expect that any such nonperformance would result in a significant effect on our results of operations or financial condition due to our diversified pool of counterparties.

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

X
- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration