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Derivatives and Hedging Activity | 9 Months Ended
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Sep. 30, 2020
Derivative Instruments And Hedging Activities Disclosure Abstract |
Derivatives and Hedging Activity | 13. Derivatives and Hedging Activity We are exposed to market risks, including changes in foreign currency exchange rates and interest rates. To manage the risk related to these exposures, we enter into various derivative instruments that reduce these risks by creating offsetting exposures. We generally do not enter into derivative transactions for trading or speculative purposes. Foreign Exchange Risk Management We are exposed to foreign exchange risk when we earn revenues, pay expenses, or enter into monetary intercompany transfers denominated in a currency that differs from our functional currency, or other transactions that are denominated in a currency other than our functional currency. We use foreign exchange derivatives, typically forward contracts and options, to reduce our overall exposure to the effects of currency fluctuations on cash flows. These exposures are hedged, on average, for less than three years. Interest Rate Risk Management We enter into various long-term debt agreements. We use interest rate derivatives, typically swaps, to reduce our exposure to the effects of interest rate fluctuations on the forecasted interest rates for up to three years into the future. We have not received or pledged any collateral related to derivative arrangements at September 30, 2020. The notional and fair values of derivatives designated as hedging instruments are as follows at September 30, 2020 and December 31, 2019 (in millions):
|  |  |  |  |  | Derivative Assets |  |  |  |  |  | Derivative Liabilities |  |  |  |
|  | Notional |  |  | Balance Sheet |  | Fair |  |  | Balance Sheet |  | Fair |
Instrument |  | Amount |  |  | Classification |  | Value |  |  | Classification |  | Value |
At September 30, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | 550.0 |  |  | Other current assets |  | $ | — |  |  | Accrued compensation and other current liabilities |  | $ | 30.3 |
|  |  |  |  |  | Other noncurrent assets |  |  | — |  |  | Other noncurrent liabilities |  |  | 47.5 |
Foreign exchange contracts (1) |  |  | 56.3 |  |  | Other current assets |  |  | 2.8 |  |  | Accrued compensation and other current liabilities |  |  | 2.3 |
|  |  |  |  |  | Other noncurrent assets |  |  | 3.9 |  |  | Other noncurrent liabilities |  |  | 2.6 |
Total |  | $ | 606.3 |  |  |  |  | $ | 6.7 |  |  |  |  | $ | 82.7 |
At December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | 800.0 |  |  | Other current assets |  | $ | 2.8 |  |  | Accrued compensation and other current liabilities |  | $ | 25.0 |
|  |  |  |  |  | Other noncurrent assets |  |  | 5.4 |  |  | Other noncurrent liabilities |  |  | 23.0 |
Foreign exchange contracts (1) |  |  | 31.7 |  |  | Other current assets |  |  | 4.5 |  |  | Accrued compensation and other current liabilities |  |  | 1.8 |
|  |  |  |  |  | Other noncurrent assets |  |  | 8.5 |  |  | Other noncurrent liabilities |  |  | 2.6 |
Total |  | $ | 831.7 |  |  |  |  | $ | 21.2 |  |  |  |  | $ | 52.4 |
(1) | Included within foreign exchange contracts at September 30, 2020 were $220.2 million of call options offset with $220.2 million of put options, and $10.4 million of buy forwards offset with $66.7 million of sell forwards. Included within foreign exchange contracts at December 31, 2019 were $342.0 million of call options offset with $342.0 million of put options, and $12.1 million of buy forwards offset with $43.8 million of sell forwards.
The effect of cash flow hedge accounting on accumulated other comprehensive loss for the three and nine-month periods ended September 30, 2020 and 2019 were as follows (in millions):
|  |  |  |  |  |  |  |  |  | Amount of |  |  |
|  |  |  |  |  | Amount of |  |  | Gain (Loss) |  |  |
|  |  |  |  |  | Gain (Loss) |  |  | Recognized |  |  |
|  | Amount of |  |  | Reclassified |  |  | in Earnings |  |  |
|  | Gain (Loss) |  |  | from |  |  | Related to |  |  |
|  | Recognized in |  |  | Accumulated |  |  | Amount |  |  |
|  | Accumulated |  |  | Other |  |  | Excluded |  |  |
|  | Other |  |  | Comprehensive |  |  | from |  |  |
|  | Comprehensive |  |  | Loss into |  |  | Effectiveness |  |  | Statement of Earnings
Instrument |  | Loss (1) |  |  | Earnings |  |  | Testing |  |  | Classification
Three-month period ended September 30, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | 3.4 |  |  | $ | (0.3 | ) |  | $ | — |  |  | Interest expense
Foreign exchange contracts |  |  | 7.0 |  |  |  | (0.4 | ) |  |  | (0.1 | ) |  | Commission revenue
|  |  |  |  |  |  | (0.4 | ) |  |  | 0.4 |  |  | Compensation expense
|  |  |  |  |  |  | (0.3 | ) |  |  | 0.4 |  |  | Operating expense
Total |  | $ | 10.4 |  |  | $ | (1.4 | ) |  | $ | 0.7 |  |  |
Three-month period ended September 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | (28.0 | ) |  | $ | (0.3 | ) |  | $ | — |  |  | Interest expense
Foreign exchange contracts |  |  | (6.0 | ) |  |  | (0.2 | ) |  |  | (0.2 | ) |  | Commission revenue
|  |  |  |  |  |  | (0.4 | ) |  |  | 0.3 |  |  | Compensation expense
|  |  |  |  |  |  | (0.2 | ) |  |  | 0.2 |  |  | Operating expense
Total |  | $ | (34.0 | ) |  | $ | (1.1 | ) |  | $ | 0.3 |  |  |
Nine-month period ended September 30, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | (104.7 | ) |  | $ | (0.9 | ) |  | $ | — |  |  | Interest expense
Foreign exchange contracts |  |  | (10.3 | ) |  |  | (0.9 | ) |  |  | (0.4 | ) |  | Commission revenue
|  |  |  |  |  |  | (1.2 | ) |  |  | 1.0 |  |  | Compensation expense
|  |  |  |  |  |  | (0.9 | ) |  |  | 0.8 |  |  | Operating expense
Total |  | $ | (115.0 | ) |  | $ | (3.9 | ) |  | $ | 1.4 |  |  |
Nine-month period ended September 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | (74.7 | ) |  | $ | (0.9 | ) |  | $ | — |  |  | Interest expense
Foreign exchange contracts |  |  | (5.9 | ) |  |  | (0.4 | ) |  |  | (0.6 | ) |  | Commission revenue
|  |  |  |  |  |  | (1.0 | ) |  |  | 1.0 |  |  | Compensation expense
|  |  |  |  |  |  | (0.7 | ) |  |  | 0.7 |  |  | Operating expense
Total |  | $ | (80.6 | ) |  | $ | (3.0 | ) |  | $ | 1.1 |  |  |
(1) | For the three and nine-month periods ended September 30, 2020 and 2019, the amount excluded from the assessment of hedge effectiveness for our foreign exchange contracts recognized in accumulated other comprehensive loss was a loss of $0.4 million and $0.8 million, respectively.
We estimate that approximately $5.5 million of pretax loss currently included within accumulated other comprehensive loss will be reclassified into earnings in the next twelve months. During the nine months ended September 30, 2020, we settled approximately $66.0 million ($49.4 million net of tax) of interest rate contracts hedges with a notional value of $350.0 million that will be amortized into interest expense in future periods.

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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 http://asc.fasb.org/topic&trid=2229140 + Details
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