DERIVATIVE INSTRUMENTS

12 Months Ended

Dec. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Cash flow hedges

As of December 31, 2023, 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 Real. The Company designated the foreign currency exchange contracts as cash flow hedges, the derivatives’ gain or loss is initially reported as a component of accumulated other comprehensive loss and subsequently reclassified into the consolidated statements of income in the “Cost of net revenues” line item, in the same period the forecasted transaction affects earnings. As of December 31, 2023, the Company estimated that the whole amount of net derivative gains or losses related to its cash flow hedges included in accumulated other comprehensive loss will be reclassified into the consolidated statements of income within the next 12 months.

In addition, the Company has entered into swap contracts to hedge the interest rate fluctuation of its financial debt held by one of its Brazilian subsidiaries. The Company designated the swap contracts as cash flow hedges. The derivatives’ gain or loss is initially reported as a component of accumulated other comprehensive loss and subsequently reclassified into the consolidated statements of income in the “Interest expense and other financial losses” line item within the next 12 months.

Fair value hedges

The Company has entered into swap contracts to hedge the interest rate and the foreign currency exposure of its fixed-rate, foreign currency financial debt held by its Brazilian subsidiaries. The Company designated the swap contracts as fair value hedges. The derivatives’ gain or loss is reported in the consolidated statements of income 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 swaps match the terms of the hedged debts, changes in the fair value of the interest rate swaps are offset by changes in the fair value of the hedged debts attributable to changes in interest rates. Accordingly, the net impact in current earnings is that the interest expense associated with the hedged debts 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 loss. The derivative’s gain or loss is initially reported as a component of accumulated other comprehensive loss and subsequently reclassified into the consolidated statements of income in the “Interest expense and other financial losses” and “Foreign currency losses, net” line items, in the same period that the interest expense affects earnings.

Derivative instruments not designated as hedging instruments

As of December 31, 2023, 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 subsidiaries, whose functional currencies are the Brazilian Real. These transactions were not designated as hedges for accounting purposes.

In addition, the Company 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. These transactions were not designated as hedges for accounting purposes.

Finally, as of December 31, 2023, the Company entered into swap contracts to hedge the interest rate fluctuation of certain portion of its financial debt in its Brazilian subsidiaries and VIEs. 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 December 31,
	2023		2022
	(In millions)
Designated as hedging instrument
Foreign exchange contracts	$	91	$	109
Interest rate swap contracts	—		229
Cross currency swap contracts	244		133

Not designated as hedging instrument
Foreign exchange contracts	16		110
Interest rate swap contracts	245		480

Derivative instruments contracts

The fair values of the Company’s outstanding derivative instruments as of December 31, 2023 and December 31, 2022 were as follows:


Derivative Instruments	Balance sheet location	December 31,
		2023		2022
		(In millions)
Foreign exchange contracts designated as cash flow hedges	Other current assets	$	—	$	1
Cross currency swap contracts designated as fair value hedge	Other current assets	1		—
Interest rate swap contracts not designated as hedging instruments	Other non-current assets	22		—
Cross currency swap contracts designated as net investment hedge	Other current liabilities	6		2
Interest rate swap contracts designated as cash flow hedges	Other current liabilities	—		8
Cross currency swap contracts designated as fair value hedge	Other current liabilities	4		2
Interest rate swap contracts not designated as hedging instruments	Other current liabilities	7		1
Foreign exchange contracts not designated as hedging instruments	Other current liabilities	1		2
Foreign exchange contracts designated as cash flow hedges	Other current liabilities	3		2
Interest rate swap contracts not designated as hedging instruments	Other non-current liabilities	10		6
Cross currency swap contracts designated as net investment hedge	Other non-current liabilities	—		1

The effects of derivative contracts designated as hedging instruments on the consolidated statements of comprehensive income as of December 31, 2023 and December 2022 were as follows:


	December 31, 2022		Amount of gain (loss) recognized in other comprehensive income		Amount of (gain) loss reclassified from accumulated other comprehensive loss		December 31, 2023
	(In millions)
Foreign exchange contracts designated as cash flow hedges	$	(2)	$	(12)	$	10	$	(4)
Interest swap contracts designated as cash flow hedges	(2)		8		(6)		—
Cross currency swap contracts designated as net investment hedge	(1)		(9)		7		(3)
	$	(5)	$	(13)	$	11	$	(7)

The effect of the Company’s fair value hedge relationships on the consolidated statements of income for the years ended December 31, 2023 and 2022 was a loss of $19 million and a loss of less than $1 million, respectively, and affected interest expense and other financial losses and foreign exchange losses, net (there were no fair value hedge relationships during the year ended December 31, 2021).

The carrying amount of the hedged items for fair value hedges included in the “Loans payable and other financial liabilities” line item of the consolidated balance sheets as of December 31, 2023 and 2022 are $216 million and $59 million, respectively.

The effect of the Company’s fair value hedge relationships on the consolidated balance sheets related to cumulative basis adjustments for fair value hedges as of December 31, 2023 and 2022 are $1 million and less than $1 million, respectively (there were no fair value hedge relationships during the year ended December 31, 2021).

The effects of derivative contracts not designated as hedging instruments on the consolidated statements of income during the years ended December 31, 2023, 2022 and 2021 were as follows:


	Year Ended December 31,
	2023		2022		2021
	(In millions)
Foreign exchange contracts not designated as hedging instruments recognized in Foreign currency losses, net	$	(11)	$	(10)	$	(2)
Currency swap contracts not designated as hedging instruments recognized in Foreign currency losses, net	—		(29)		2
Interest rate contracts not designated as hedging instruments recognized in Interest expense and other financial losses	2		(7)		—
	$	(9)	$	(46)	$	—