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DERIVATIVE INSTRUMENTS | 3 Months Ended
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Mar. 31, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE INSTRUMENTS | DERIVATIVE INSTRUMENTS Cash flow hedges As of March 31, 2024, 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 interim condensed consolidated statements of income in the “Cost of net revenues and financial expenses” line item, in the same period the forecasted transaction affects earnings. As of March 31, 2024, 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 interim condensed 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 interim condensed consolidated statements of income in the “Cost of net revenues and financial expenses” 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 interim condensed 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 rates. 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 interim condensed 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 March 31, 2024, 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 March 31, 2024, the Company entered into swap contracts to hedge the interest rate fluctuation of a 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
| March 31, 2024 |  | December 31, 2023
| (In millions)
Designated as hedging instrument |  |  |
Foreign exchange contracts | $ | 95 |  |  | $ | 91 |
Cross currency swap contracts | 229 |  |  | 244 |
Not designated as hedging instrument |  |  |
Foreign exchange contracts | $ | 4 |  |  | $ | 16 |
Interest rate swap contracts | 230 |  |  | 245 |
Derivative instrument contracts The fair values of the Company’s outstanding derivative instruments as of March 31, 2024 and December 31, 2023 were as follows:
Derivative instruments | Balance sheet location |  | March 31, |  | December 31,
| 2024 |  | 2023
|  |  | (In millions)
Cross currency swap contracts designated as fair value hedge | Other current assets |  | $ | 1 |  |  | $ | 1 |
Interest rate swap contracts not designated as hedging instruments | Other non-current assets |  | 22 |  |  | 22 |
Cross currency swap contracts designated as net investment hedge | Other current liabilities |  | 2 |  |  | 6 |
Cross currency swap contracts designated as fair value hedge | Other current liabilities |  | — |  |  | 4 |
Interest rate swap contracts not designated as hedging instruments | Other current liabilities |  | 7 |  |  | 7 |
Foreign exchange contracts not designated as hedging instruments | Other current liabilities |  | — |  |  | 1 |
Foreign exchange contracts designated as cash flow hedges | Other current liabilities |  | 1 |  |  | 3 |
Interest rate swap contracts not designated as hedging instruments | Other non-current liabilities |  | 12 |  |  | 10 |
The effects of derivative contracts on the interim condensed consolidated statement of comprehensive income for the three-month periods ended March 31, 2024 and March 31, 2023 were as follows:
| December 31, 2023 |  | Amount of gain recognized in other comprehensive loss |  | Amount of loss reclassified from accumulated other comprehensive loss |  | March 31, 2024
| (In millions)
Foreign exchange contracts designated as cash flow hedges | $ | (4) |  |  | $ | 2 |  |  | $ | 1 |  |  | $ | (1) |
Cross currency swap contracts designated as net investment hedge | (3) |  |  | — |  |  | 2 |  |  | (1) |
| $ | (7) |  |  | $ | 2 |  |  | $ | 3 |  |  | $ | (2) |
| December 31, 2022 |  | Amount of gain (loss) recognized in other comprehensive income |  | Amount of (gain) loss reclassified from accumulated other comprehensive loss |  | March 31, 2023
| (In millions)
Foreign exchange contracts designated as cash flow hedges | $ | (2) |  |  | $ | (4) |  |  | $ | 1 |  |  | $ | (5) |
Interest swap contracts designated as cash flow hedges | (2) |  |  | 2 |  |  | (1) |  |  | (1) |
Cross currency swap contracts designated as net investment hedge | (1) |  |  | (5) |  |  | 2 |  |  | (4) |
| $ | (5) |  |  | $ | (7) |  |  | $ | 2 |  |  | $ | (10) |
The effect of the Company’s fair value hedge relationships on the interim condensed consolidated statements of income for the three-month period ended March 31, 2024 is a net gain of $4 million, and affected Cost of net revenues and financial expenses and foreign exchange losses, net. For the three-month period ended March 31, 2023, the Company recognized a loss of $5 million that affected Cost of net revenues and financial expenses. The carrying amount of the hedged items for fair value hedges included in the “Loans payable and other financial liabilities” line item of the interim condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023 was $219 million and $216 million, respectively. The effect of the Company’s fair value hedge relationships on the interim condensed consolidated balance sheets related to cumulative basis adjustments for fair value hedges as of March 31, 2024 and December 31, 2023 is $1 million, respectively. The effects of derivative contracts not designated as hedging instruments on the interim condensed consolidated statements of income for the three-month periods ended March 31, 2024 and 2023 were as follows:
|  |  | Three Months Ended March 31,
|  |  |  |  | 2024 |  | 2023
|  |  | (In millions)
Foreign exchange contracts not designated as hedging instruments recognized in Foreign currency losses, net |  |  |  |  | $ | — |  |  | $ | (6) |
Interest rate contracts not designated as hedging instruments recognized in Interest expense and other financial losses |  |  |  |  | (2) |  |  | 2 |
|  |  |  |  | $ | (2) |  |  | $ | (4) |

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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/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
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