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Derivative Instruments | 12 Months Ended
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Dec. 31, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments | Derivative Instruments Our exposure to market risk includes changes in foreign exchange rates. We have operations in foreign countries where the functional currency is primarily the local currency. For international operations that are determined to be extensions of the parent company, the U.S. dollar is the functional currency. We typically have naturally hedged positions in most countries from a local currency perspective with offsetting assets and liabilities. As of December 31, 2017 and December 31, 2016, we have entered into foreign exchange forward contracts to mitigate or hedge the effect of adverse fluctuations in foreign currency exchange rates. Foreign currency forward contracts are recorded at fair value that is based on foreign currency exchange rates in active markets; therefore, we classify these derivative contracts within Level 2 of the fair value hierarchy. We do not enter into any derivative financial instruments for speculative purposes. Undesignated Derivative Instruments During the three months ended December 31, 2017, we entered into foreign exchange forward contracts in order to mitigate the change in fair value of specific assets and liabilities in the consolidated balance sheet. These forward contracts do not qualify for hedge accounting. As of December 31, 2017, the aggregate notional value of these outstanding forward contracts was $130 million. The changes in fair value of these forward contracts are recorded in prepaid and other assets in the consolidated balance sheet with their corresponding change in fair value recognized into selling and general expenses in the consolidated statement of income. The net gain recorded in selling and general expense for the year ended December 31, 2017 related to these contracts was $3 million. Cash Flow Hedges During the three months ended March 31, 2017 and December 31, 2017, we entered into a series of foreign exchange forward contracts to hedge a portion of our Indian rupee, British pound, and Euro exposures through the fourth quarter of 2017 and 2018, respectively. These contracts are intended to offset the impact of the movement of exchange rates on future revenue and operating costs and are scheduled to mature within twelve months. The changes in the fair value of these contracts are initially reported in accumulated other comprehensive loss in our consolidated balance sheet and are subsequently reclassified into revenue and selling and general expenses in the same period that the hedged transaction affects earnings. During the three months ended March 31, 2016, we entered into a series of foreign exchange forward contracts to hedge a portion of our Indian Rupee exposure through the fourth quarter of 2016. These contracts were intended to offset the impact of the movement of exchange rates on future operating costs and matured at the end of each quarter during 2016. The changes in the fair value of these contracts were initially reported in accumulated other comprehensive loss in our consolidated balance sheet and subsequently reclassified into selling and general expenses in the same period that the hedge contract matures. As of December 31, 2017, we estimate that $2 million of the net gains related to derivatives designated as cash flow hedges recorded in other comprehensive income is expected to be reclassified into earnings within the next twelve months. There was no material hedge ineffectiveness for the year ended December 31, 2017. As of December 31, 2017 and December 31, 2016, the aggregate notional value of our outstanding foreign currency forward contracts designated as cash flow hedges was $307 million and $65 million, respectively. The following table provides information on the location and fair value amounts of our cash flow hedges as of December 31, 2017 and December 31, 2016:
(in millions) |  | December 31, |  | December 31,
Balance Sheet Location |  | 2017 |  | 2016
Derivatives designated as cash flow hedges: |  |  |  |
Prepaid and other current assets | Foreign exchange forward contracts | $ | 3 |  |  | $ | 3 |
The following table provides information on the location and amounts of pre-tax gains (losses) on our cash flow hedges for the years ended December 31:
(in millions) | Gain (Loss) Recognized in Accumulated Other Comprehensive Loss (effective portion) |  | Location of Gain Reclassified from Accumulated Other Comprehensive Loss into Income (effective portion) |  | Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (effective portion)
Cash flow hedges - designated as hedging instruments | 2017 |  | 2016 |  | 2015 |  |  |  | 2017 |  | 2016 |  | 2015
Foreign exchange forward contracts | $ | — |  |  | $ | 3 |  |  | $ | — |  |  | Selling and general expenses |  | $ | 9 |  |  | $ | 4 |  |  | $ | — |
The activity related to the change in unrealized gains (losses) in accumulated other comprehensive loss was as follows for the years ended December 31:
(in millions) | Year ended December 31,
| 2017 |  | 2016 |  | 2015
Net unrealized gains (losses) on cash flow hedges, net of taxes, beginning of year | $ | 2 |  |  | $ | (1 | ) |  | $ | (1 | )
Change in fair value, net of tax | 9 |  |  | 7 |  |  | — |
Reclassification into earnings, net of tax | (9 | ) |  | (4 | ) |  | — |
Net unrealized gains (losses) on cash flow hedges, net of taxes, end of year | $ | 2 |  |  | $ | 2 |  |  | $ | (1 | )

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- 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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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