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Derivative Instruments | 9 Months Ended
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Sep. 30, 2022
Derivative Instruments [Abstract] |
Derivative Instruments | 14. Derivative instruments Cash Flow Hedge As of September 30, 2022 the Company used foreign currency exchange contracts to hedge the foreign currency effects related to the forecasted purchase of MPOS devices in U.S. dollars owed by a Brazilian subsidiary whose functional currency is the Brazilian Reais. The Company designated the foreign currency exchange contracts as cash flow hedges, the derivative’s gain or loss is initially reported as a component of accumulated other comprehensive income and subsequently reclassified into earnings in the same period the forecasted transaction affects earnings. As of September 30, 2022, the Company estimated that the whole amount of net derivative gains or losses related to its cash flow hedges included in accumulated other comprehensive income will be reclassified into earnings within the next 12 months. In addition, the Company has entered into swap contracts to hedge the interest rate fluctuation of its financial debt issued by one of its Brazilian subsidiaries. The Company designated the swap contracts as cash flow hedges. The derivative’s gain or loss is initially reported as a component of accumulated other comprehensive income and subsequently reclassified into earnings within the next 12 months. Fair Value Hedge The Company has entered into a swap contract to hedge the interest rate and the foreign currency exposure of its fixed-rate, foreign currency financial debt issued by one of its Brazilian subsidiaries. The Company designated the swap contract as fair value hedge. The derivative’s gain or loss is reported in earnings in the same line items as the change in the value of the financial debt due to the hedged risks. Since the terms of the interest rate swap match the terms of the hedged debt, changes in the fair value of the interest rate swap are offset by changes in the fair value of the hedged debt attributable to changes in interest rates. Accordingly, the net impact in current earnings is that the interest expense associated with the hedged debt is recorded at the floating rate. Net Investment Hedge The Company used cross currency swap contracts, to reduce the foreign currency exchange risk related to its investment in its Brazilian foreign subsidiaries and the interest rate risk. This derivative was designated as a net investment hedge and, accordingly, gains and losses are reported as a component of accumulated other comprehensive income. The derivative’s gain or loss is initially reported as a component of accumulated other comprehensive income and subsequently reclassified into earnings in the same period that the interest expense affects earnings. Derivative instruments not designated as hedging instruments As of September 30, 2022, the Company entered into certain foreign currency exchange contracts to hedge the foreign currency fluctuations related to certain transactions denominated in U.S. dollars of certain of its Brazilian and Mexican subsidiaries, whose functional currencies are the Brazilian Reais and Mexican Peso, respectively. These transactions were not designated as hedges for accounting purposes. In addition, the Company has entered into full cross currency swap contracts to hedge the interest rate fluctuation and foreign currency fluctuations of its financial debt nominated in U.S. dollars held by its Brazilian subsidiaries that mature in 2022. These transactions were not designated as hedges for accounting purposes. Finally, as of September 30, 2022, the Company entered into swap contracts to hedge the interest rate fluctuation of certain portion of its financial debt in its Brazilian subsidiaries. These transactions were not designated as hedges for accounting purposes. ‎ The following table presents the notional amounts of the Company’s outstanding derivative instruments:
|  | Notional Amount as of |  | Notional Amount as of
|  | September 30, 2022 |  | December 31, 2021
|  | (In millions)
Designated as hedging instrument |  |  |  |
Foreign exchange contracts | $ | 91 | $ | 89
Interest rate contracts |  | 221 |  | —
Cross currency swap contracts |  | 133 |  | 94
Not designated as hedging instrument |  |  |  |
Foreign exchange contracts |  | 90 |  | —
Interest rate contracts |  | 450 |  | 249
Cross currency swap contracts |  | 100 |  | 160
Derivative Instrument Contracts The fair values of the Company’s outstanding derivative instruments as of September 30, 2022 and December 31, 2021 were as follows:
|  |  |  |  | September 30, |  |  | December 31,
|  | Balance sheet location |  |  | 2022 |  |  | 2021
|  |  |  | (In millions)
Derivatives |  |  |  |  |  |  |  |
Foreign exchange contracts not designated as hedging instruments |  | Other current Assets |  | $ | 2 |  | $ | —
Cross currency swap contracts designated as net investment hedge |  | Other non-current Assets |  |  | — |  |  | 7
Cross currency swap contracts not designated as hedging instruments |  | Other current Assets |  |  | — |  |  | 8
Foreign exchange contracts designated as cash flow hedges |  | Other current Assets |  |  | 1 |  |  | 2
Cross currency swap contracts not designated as hedging instruments |  | Other current Liabilities |  |  | 13 |  |  | 5
Cross currency swap contracts designated as net investment hedge |  | Other non-current Liabilities |  |  | 1 |  |  | —
Interest rate contracts designated as cash flow hedges |  | Other current Liabilities |  |  | 9 |  |  | —
Foreign exchange contracts designated as cash flow hedges |  | Other current Liabilities |  |  | 2 |  |  | 1
Interest rate contracts not designated as hedging instruments |  | Other current Liabilities |  |  | 5 |  |  | —
The effects of derivative contracts on the unaudited interim condensed consolidated statement of comprehensive income as of September 30, 2022 were as follows:
|  |  |  |  |  |  |  | Amount of |  | Amount of loss reclassified |  |
|  |  |  |  | December 31, |  |  | gains recognized |  | from accumulated |  | September 30,
|  |  |  |  | 2021 |  |  | in other comprehensive loss |  | other comprehensive loss |  | 2022
|  |  |  |  | (In millions)
Foreign exchange contracts designated as cash flow hedges |  |  |  |  | $ 1 |  |  | $ (10) |  | $ 7 |  | $ (2)
Interest Swap Contracts designated as cash flow hedges |  |  |  |  | — |  |  | (14) |  | 9 |  | (5)
Cross currency swap contract designated as net investment hedge |  |  |  |  | 7 |  |  | (9) |  | 2 |  | —
Total |  |  |  |  | $ 8 |  |  | $ (33) |  | $ 18 |  | $ (7)
‎ The following table presents the effects of the Company’s fair value hedge relationships on the Consolidated Statements of Income for the periods presented:
|  |  |  | Amount of Gain (Loss) recognized in Income
|  | Income Statement |  | Nine Months Ended September 30, |  | Three Months Ended September 30,
|  | Location |  |  | 2022 |  | 2021 |  | 2022 |  | 2021
Derivative asset |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest Rate Swap |  | Interest Expense |  | $ | 1 |  | $ | — |  | $ | 1 |  | $ | —
Derivative asset - Hedged Item |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest Rate Swap |  | Interest Expense |  |  | (1) |  |  | — |  |  | (1) |  |  | —
The following table presents the amounts that were recorded in the Consolidated Balance Sheets related to cumulative basis adjustments for fair value hedges as of the dates presented:
|  |  |  | Carrying amount of the hedged item |  | Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of the Hedged Liability
Balance Sheet Location |  |  |  | September 30, 2022 |  | December 31, 2021 |  | 2022 |  | 2021
Loans Payable and other financial liabilities (current) |  |  |  | $ | 57 |  | $ | — |  | $ | (1) |  | $ | —
The effects of derivative contracts not designated as hedging instruments on the unaudited interim condensed consolidated statements of income for the nine and three-month periods ended September 30, 2022 and 2021 were as follows:
|  | Nine Months Ended September 30, |  |  | Three Months Ended September 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
|  | (In millions) |  |  | (In millions)
Foreign exchange contracts not designated as hedging instruments recognized in foreign exchange losses, net | $ | — |  | $ | (4) |  | $ | — |  | $ | 7
Currency Swap contracts not designated as hedging instruments recognized in foreign exchange losses, net |  | (23) |  |  | 3 |  |  | (1) |  |  | 3
Interest rate contracts not designated as hedging instruments recognized in interest expense and other financial losses |  | (5) |  |  | — |  |  | (5) |  |  | —
‎

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI https://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008 + Details
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