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Financial Instruments
 9 Months Ended
Sep. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Financial Instruments
Note 9. Financial Instruments

Fair Value of Derivative Instruments
Derivative instruments were recorded at fair value in the condensed consolidated balance sheets as follows:
 As of September 30, 2023As of December 31, 2022
Asset
Derivatives		Liability
Derivatives		Asset
Derivatives		Liability
Derivatives
 (in millions)
Derivatives designated as
accounting hedges:
Interest rate contracts$140 $33 $132 $35 
Net investment hedge derivative contracts (1)
238 166 265 241 
$378 $199 $397 $276 
Derivatives not designated as
   accounting hedges:
Currency exchange contracts$224 $93 $185 $103 
Commodity contracts1,035 874 200 247 
Interest rate contracts10 6 8 — 
Equity method investment contracts (2)
— — — 3 
$1,269 $973 $393 $353 
Total fair value$1,647 $1,172 $790 $629 

(1)Net investment hedge derivative contracts consist of cross-currency interest rate swaps, forward contracts and options. We also designate some of our non-U.S. dollar denominated debt to hedge a portion of our net investments in our non-U.S. operations. This debt is not reflected in the table above, but is included in long-term debt discussed in Note 8, Debt and Borrowing Arrangements. Both net investment hedge derivative contracts and non-U.S. dollar denominated debt acting as net investment hedges are also disclosed in the Derivative Volume table and the Hedges of Net Investments in International Operations section appearing later in this footnote.
(2)Equity method investment contracts consist of the bifurcated embedded derivative option that was a component of the September 20, 2021 €300 million exchangeable bonds issuance. Refer to Note 6, Investments.

We record derivative assets and liabilities on a gross basis on our condensed consolidated balance sheets. The fair value of our asset derivatives is recorded within other current assets and other assets and the fair value of our liability derivatives is recorded within other current liabilities and other liabilities.
The fair values (asset/(liability)) of our derivative instruments were determined using:
 As of September 30, 2023
 Total
Fair Value of Net
Asset/(Liability)		Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)		Significant
Other Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
 (in millions)
Currency exchange contracts$131 $— $131 $— 
Commodity contracts161 (41)202 — 
Interest rate contracts111 — 111 — 
Net investment hedge contracts72 — 72 — 
Total derivatives$475 $(41)$516 $— 

 As of December 31, 2022
 Total
Fair Value of Net
Asset/(Liability)		Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)		Significant
Other Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
 (in millions)
Currency exchange contracts$82 $— $82 $— 
Commodity contracts(47)(35)(12)— 
Interest rate contracts105 — 105 — 
Net investment hedge contracts24 — 24 — 
Equity method investment contracts(3)— (3)— 
Total derivatives$161 $(35)$196 $— 

Level 1 financial assets and liabilities consist of exchange-traded commodity futures and listed options. The fair value of these instruments is determined based on quoted market prices on commodity exchanges.

Level 2 financial assets and liabilities consist primarily of over-the-counter (“OTC”) currency exchange forwards, options and swaps; commodity forwards and options; net investment hedge contracts; and interest rate swaps. Our currency exchange contracts are valued using an income approach based on observable market forward rates less the contract rate multiplied by the notional amount. Commodity derivatives are valued using an income approach based on the observable market commodity index prices less the contract rate multiplied by the notional amount or based on pricing models that rely on market observable inputs such as commodity prices. Our bifurcated exchange options are valued, as derivative instrument liabilities, using the Black-Scholes option pricing model. This model requires assumptions related to the market price of the underlying note and associated credit spread combined with the share of price, expected dividend yield, and expected volatility of the JDE Peet’s shares over the life of the option. Our calculation of the fair value of interest rate swaps is derived from a discounted cash flow analysis based on the terms of the contract and the observable market interest rate curve. Our calculation of the fair value of financial instruments takes into consideration the risk of nonperformance, including counterparty credit risk. Our OTC derivative transactions are governed by International Swap Dealers Association agreements and other standard industry contracts. Under these agreements, we do not post nor require collateral from our counterparties. The majority of our derivative contracts do not have a legal right of set-off. We manage the credit risk in connection with these and all our derivatives by entering into transactions with counterparties with investment grade credit ratings, limiting the amount of exposure with each counterparty and monitoring the financial condition of our counterparties.
Derivative Volume
The notional values of our hedging instruments were:
 Notional Amount
 As of September 30,
2023		As of December 31, 2022
 (in millions)
Currency exchange contracts:
Intercompany loans and forecasted interest payments
$2,645 $2,085 
Forecasted transactions
5,776 5,470 
Commodity contracts (1)
12,767 7,777 
Interest rate contracts3,384 4,147 
Net investment hedges:
Net investment hedge derivative contracts7,630 7,319 
Non-U.S. dollar debt designated as net investment hedges:
Euro notes
3,368 3,410 
Swiss franc notes
645 638 
Canadian dollar notes
442 443 
(1)Prior year notional value has been revised.

Cash Flow Hedges
Cash flow hedge activity, net of taxes, is recorded within accumulated other comprehensive earnings/(losses). Refer to Note 13, Reclassifications from Accumulated Other Comprehensive Income for further information on current period activity.

Based on current market conditions, we would expect to transfer gains of $58 million (net of taxes) for interest rate cash flow hedges to earnings during the next 12 months.

Cash Flow Hedge Coverage
As of September 30, 2023, our longest dated cash flow hedges were interest rate swaps that hedge forecasted interest rate payments over the next 2 years, 11 months.

Hedges of Net Investments in International Operations
Net investment hedge ("NIH") derivative contracts
We enter into cross-currency interest rate swaps, forwards and options to hedge certain investments in our non-U.S. operations against movements in exchange rates. The aggregate notional value as of September 30, 2023 was $7.6 billion.

Net investment hedge derivative contract impacts on other comprehensive earnings and net earnings were:
 For the Three Months Ended
September 30,		For the Nine Months Ended
September 30,
 2023202220232022
 (in millions)
After-tax gain on NIH contracts(1)
$72 $440 $89 $788 

(1)Amounts recorded for unsettled and settled NIH derivative contracts are recorded in the cumulative translation adjustment within other comprehensive earnings. The cash flows from the settled contracts are reported within other investing activities in the condensed consolidated statement of cash flows.
 For the Three Months Ended
September 30,		For the Nine Months Ended
September 30,
 2023202220232022
 (in millions)
Amounts excluded from the assessment of hedge effectiveness(1)
$38 $32 $110 $84 

(1)We elected to record changes in the fair value of amounts excluded from the assessment of effectiveness in net earnings within interest and other expense, net.
Non-U.S. dollar debt designated as net investment hedges
After-tax gains/(losses) related to hedges of net investments in international operations were recorded within the cumulative translation adjustment section of other comprehensive income and were:

 For the Three Months Ended
September 30,		For the Nine Months Ended
September 30,
 2023202220232022
 (in millions)
Euro notes$82 $165 $32 $381 
British pound sterling notes— 20 — 47 
Swiss franc notes11 23 (5)50 
Canadian notes9 24 1 31 

Economic Hedges
Pre-tax gains/(losses) recorded in net earnings for economic hedges were:

 For the Three Months Ended
September 30,		For the Nine Months Ended
September 30,		Location of Gain/(Loss) Recognized in Earnings
 2023202220232022
 (in millions) 
Currency exchange contracts:
Intercompany loans and forecasted interest payments$— $(1)$47 $(5)Interest and other expense, net
Forecasted transactions
15 (9)44 98 Cost of sales
Forecasted transactions
— 8 13 (23)Interest and other expense, net
Forecasted transactions
(3)(5)(9)(2)Selling, general and administrative expenses
Commodity contracts72 (31)176 166 Cost of sales
Equity method investment
   contracts		4 (3)7 (3)Gain/(loss) on equity method investment transactions
Total$88 $(41)$278 $231 
Fair Value of Contingent Consideration
The following is a summary of our contingent consideration liability activity:

 For the Three Months Ended
September 30,		For the Nine Months Ended
September 30,
 2023202220232022
 (in millions)
Liability at beginning of period$567 $173 $642 $159 
Contingent consideration arising from acquisitions— 440 — 440 
Changes in fair value35 — 50 16 
Payments— — (90)— 
Currency— — — (2)
Liability at end of period$602 $613 $602 $613 

Contingent consideration was recorded at fair value in the condensed consolidated balance sheets as follows:

 As of September 30, 2023
 Total Fair Value of
Liability		Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)		Significant
Other Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
 (in millions)
Clif Bar (1)
$494 $— $— $494 
Other (2)
108 — — 108 
Total contingent consideration$602 $— $— $602 

 As of December 31, 2022
 Total Fair Value of
Liability		Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)		Significant
Other Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
 (in millions)
Clif Bar (1)
$452 $— $— $452 
Other (2)
190 — — 190 
Total contingent consideration$642 $— $— $642 

(1)In connection with the Clif Bar acquisition, we entered into a contingent consideration arrangement that may require us to pay additional consideration to the sellers for achieving certain net revenue, gross profit and EBITDA targets in 2025 and 2026 that exceed our base financial projections for the business implied in the upfront purchase price. The other contingent consideration liabilities are recorded at fair value within long-term liabilities. The estimated fair value of the contingent consideration obligation at the acquisition date was determined using a Monte Carlo simulation and recorded in other liabilities. Significant assumptions used in assessing the fair value of the liability include financial projections for net revenue, gross profit, and EBITDA, as well as discount and volatility rates. Fair value adjustments are primarily recorded in selling, general and administrative expenses in the condensed consolidated statement of earnings. Refer to Note 2, Acquisitions and Divestitures for additional information.
(2)The other contingent consideration liabilities are recorded at fair value, with $108 million and $102 million classified as other current liabilities at September 30, 2023 and December 31, 2022, respectively, and $88 million classified as long-term liabilities at December 31, 2022. The fair value of this contingent consideration was determined using a Monte Carlo valuation model based on Level 3 inputs, including management's latest estimate of forecasted future results. Other key assumptions included discount rate and volatility. Fair value adjustments are recorded in selling, general and administrative expenses in the condensed consolidated statement of earnings. Refer to Note 2, Acquisitions and Divestitures for additional information.