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Derivatives and Hedging Instruments | 3 Months Ended
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Mar. 31, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives and Hedging Instruments | Derivatives and Hedging Instruments Derivatives and Other Instruments Designated as Hedging Instruments Net Investment Hedges Foreign Currency Debt: We are exposed to the impact of foreign exchange rate fluctuations on the value of investments in our foreign subsidiaries whose functional currencies are other than the U.S. dollar. In order to mitigate the impact of foreign currency exchange rates, we have entered into various foreign currency debt obligations, which are designated as hedges against our net investments in foreign subsidiaries. As of March 31, 2025 and December 31, 2024, the total principal amounts of foreign currency debt obligations designated as net investment hedges were $1.1 billion and $1.0 billion, respectively. Foreign Currency Forward Contracts: We use foreign currency forward contracts, designated as net investment hedges, to hedge against the effect of foreign exchange rate fluctuations on our net investment in our foreign subsidiaries. We use the spot method to assess hedge effectiveness and recognize fair value changes from spot rates in other comprehensive income (loss). We exclude forward points from the assessment of hedge effectiveness and amortize the initial value of the excluded component through interest expense. The difference between fair value changes from the excluded component and the amount amortized is recognized in other comprehensive income (loss). Embedded Derivatives: Certain of our customer agreements that are priced in currencies different from the functional or local currencies of the parties involved are deemed to have foreign currency forward contracts embedded in them. These embedded derivatives are separated from their host contracts and carried on our balance sheet at their fair value. The majority of these embedded derivatives arise as a result of our foreign subsidiaries pricing their customer contracts in U.S. dollars. We use these forward contracts embedded within our customer agreements to hedge against the effect of foreign exchange rate fluctuations on our net investment in our foreign subsidiaries. As of both March 31, 2025 and December 31, 2024, the total remaining contract value of such customer agreements outstanding under this hedging program was $191 million and $213 million, respectively. Cross-currency Interest Rate Swaps: We also use cross-currency interest rate swaps, designated as net investment hedges, which effectively convert a portion of our U.S. dollar-denominated fixed-rate debt to foreign currency-denominated fixed-rate debt, to hedge the currency exposure associated with our net investment in our foreign subsidiaries. We use the spot method to assess hedge effectiveness and recognize fair value changes from spot rates in other comprehensive income (loss). We exclude time value and cross currency basis spread from the assessment of hedge effectiveness and recognize the excluded component in interest expense through the swap accrual process. The difference between fair value changes of the excluded component and the amount amortized is recognized in other comprehensive income (loss). Cash Flow Hedges Foreign Currency Forward Contracts: We enter into intercompany foreign currency forward contracts ("intercompany derivatives") with our wholly-owned subsidiaries in our EMEA region in order to hedge certain forecasted revenues and expenses denominated in currencies other than the U.S. Dollar (primarily the British Pound and the Euro). Simultaneously, we enter into foreign currency forward contracts with unrelated third parties to externally hedge the net exposure created by such intercompany derivatives. We designate the intercompany derivatives as cash flow hedges. We do not exclude any components from the assessment of hedge effectiveness and the change in fair value of these derivatives is recognized in other comprehensive income (loss) until the hedged transaction occurs. As of March 31, 2025, our foreign currency forward contracts had maturity dates ranging from April 2025 to December 2027 and we had an insignificant net gain recorded within accumulated other comprehensive income (loss) to be reclassified to revenues and expenses for cash flow hedges that will mature in the next 12 months. As of December 31, 2024, our foreign currency forward contracts had maturity dates ranging from January 2025 to December 2026 and we had a net gain of $38 million recorded within accumulated other comprehensive income (loss) to be reclassified to revenues and expenses for cash flow hedges that will mature in the 12 months following December 31, 2024. Cross-currency Interest Rate Swaps: We use cross-currency swaps, which are designated as cash flow hedges, to manage the foreign currency exposure associated with a portion of our foreign currency-denominated variable-rate debt and our U.S. dollar-denominated fixed-rate debt issued by our foreign subsidiaries. As of March 31, 2025, our cross-currency interest rate swaps had maturity dates ranging from March 2026 to June 2034. We had a net gain of $10 million recorded within accumulated other comprehensive income (loss) to be reclassified to interest expense in the next 12 months. As of December 31, 2024, our cross-currency interest rate swaps had maturity dates ranging from March 2026 to June 2034. We had a net gain of $13 million recorded within accumulated other comprehensive income (loss) to be reclassified to interest expense in the 12 months following December 31, 2024. We use the spot method to assess hedge effectiveness. Fair value changes from spot rates are recognized in other comprehensive income initially and immediately reclassified to earnings to offset the gain or loss from remeasuring the associated debt. We exclude time value and cross currency basis spread from the assessment of hedge effectiveness and recognize the excluded component in interest expense through the swap accrual process. The difference between fair value changes of the excluded component and the amount amortized is recognized in other comprehensive income (loss). Interest Rate Locks: We hedge the interest rate exposure created by anticipated fixed-rate debt issuances through the use of treasury locks and swap locks (collectively, interest rate locks), which are designated as cash flow hedges. As of both March 31, 2025 and December 31, 2024, we had no interest rate locks outstanding. When interest rate locks are settled, any gain or loss from the transactions is deferred and included as a component of other comprehensive income (loss) and is amortized to interest expense over the term of the forecasted hedged transaction which is equivalent to the term of the interest rate locks. As of both March 31, 2025 and December 31, 2024, we had a net gain of $3 million, recorded within accumulated other comprehensive income (loss) to be reclassified to interest expense in the 12 months following March 31, 2025 and December 31, 2024, respectively, for interest rate locks. Derivatives Not Designated as Hedging Instruments Foreign Currency Forward Contracts: We also use foreign currency forward contracts to manage the foreign exchange risk associated with certain foreign currency-denominated monetary assets and liabilities. As a result of foreign currency fluctuations, the U.S. dollar equivalent values of our foreign currency-denominated monetary assets and liabilities change. Gains and losses on these contracts are included in other income (expense), on a net basis, along with the foreign currency gains and losses of the related foreign currency-denominated monetary assets and liabilities associated with these foreign currency forward contracts. Cross-currency Interest Rate Swaps: We may, from time to time, elect to de-designate a portion of our cross-currency interest rate swaps previously designated as hedging instruments. Gains and losses subsequent to the de-designation are recognized in other income (expense). Notional Amounts and Fair Value of Derivative Instruments The following table presents the composition of derivative instruments recognized in our condensed consolidated balance sheets, excluding accrued interest (in millions):
| March 31, 2025 |  | December 31, 2024
|  |  | Fair Value |  |  |  | Fair Value
| Notional Amount (1) |  | Assets (2) |  | Liabilities (3) |  | Notional Amount (1) |  | Assets (2) |  | Liabilities (3)
Net investment hedges: |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts | $ | 968 |  |  | $ | 19 |  |  | $ | 15 |  |  | $ | 966 |  |  | $ | 39 |  |  | $ | 17 |
Cross-currency interest rate swaps | 1,971 |  |  | 109 |  |  | 2 |  |  | 1,986 |  |  | 189 |  |  | 1 |
Cash flow hedges: |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts | 1,723 |  |  | 14 |  |  | 18 |  |  | 1,365 |  |  | 53 |  |  | — |
Cross-currency interest rate swaps | 1,030 |  |  | 55 |  |  | — |  |  | 1,030 |  |  | 48 |  |  | — |
Non-designated derivatives: |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts | 2,586 |  |  | 12 |  |  | 30 |  |  | 3,536 |  |  | 80 |  |  | 9 |
Cross-currency interest rate swaps | 1,211 |  |  | 138 |  |  | 14 |  |  | 1,395 |  |  | 182 |  |  | 45 |
Total | $ | 9,489 |  |  | $ | 347 |  |  | $ | 79 |  |  | $ | 10,278 |  |  | $ | 591 |  |  | $ | 72 |
(1)Excludes embedded derivatives. (2)As presented in our condensed consolidated balance sheets within other current assets and other assets. (3)As presented in our condensed consolidated balance sheets within other current liabilities and other liabilities. Impact on Accumulated Other Comprehensive Income (Loss) The pre-tax gains (losses) from hedging instruments recognized in accumulated other comprehensive income (loss) were as follows (in millions):
|  |  |  | Three Months Ended March 31,
|  |  |  |  |  | 2025 |  | 2024
Net investment hedges: |  |  |  |  |  |  |  |
Foreign currency debt |  |  |  |  | $ | (41) |  |  | $ | 29 |
Foreign currency forward contracts (included component) |  |  |  |  | (6) |  |  | 27 |
Cross-currency interest rate swaps (included component) |  |  |  |  | (96) |  |  | 76 |
Cross-currency interest rate swaps (excluded component) |  |  |  |  | 15 |  |  | (2) |
Total |  |  |  |  | $ | (128) |  |  | $ | 130 |
Cash flow hedges: |  |  |  |  |  |  |  |
Foreign currency forward contracts |  |  |  |  | $ | (57) |  |  | $ | 27 |
Cross-currency interest rate swaps (excluded component) |  |  |  |  | 28 |  |  | (2) |
Interest rate locks |  |  |  |  | — |  |  | 1 |
Total |  |  |  |  |  | $ | (29) |  |  | $ | 26 |
Impact on Earnings The gains (losses) from derivative instruments recognized in earnings, and location of such gains (losses) in the condensed consolidated statements of operations were as follows (in millions):
|  |  |  |  | Three Months Ended March 31,
| Location of gain (loss) |  |  |  |  |  | 2025 |  | 2024
Net investment hedges: |  |  |  |  |  |  |  |  |
Foreign currency forward contracts (excluded component) | Interest expense |  |  |  |  |  | $ | 2 |  |  | $ | 2 |
Cross-currency interest rate swaps (excluded component) | Interest expense |  |  |  |  |  | 5 |  |  | 8 |
Total |  |  |  |  |  |  | $ | 7 |  |  | $ | 10 |
Cash flow hedges: |  |  |  |  |  |  |  |  |
Foreign currency forward contracts | Revenues |  |  |  |  |  | $ | 18 |  |  | $ | (3) |
Foreign currency forward contracts | Costs and operating expenses |  |  |  |  |  | (9) |  |  | 2 |
Cross-currency interest rate swaps (excluded component) | Interest expense |  |  |  |  |  | 4 |  |  | — |
Cross-currency interest rate swaps (included component) | Other income (expense) |  |  |  |  |  | (22) |  |  | (3) |
Total |  |  |  |  |  |  | $ | (9) |  |  | $ | (4) |
Non designated hedges: |  |  |  |  |  |  |  |  |
Foreign currency forward contracts | Other income (expense) |  |  |  |  |  | $ | (44) |  |  | $ | 76 |
Cross-currency interest rate swaps | Other income (expense) |  |  |  |  |  | 2 |  |  | — |
Total |  |  |  |  |  |  | $ | (42) |  |  | $ | 76 |
Offsetting Derivative Assets and Liabilities We enter into master netting agreements with our counterparties for transactions other than embedded derivatives to mitigate credit risk exposure to any single counterparty. Master netting agreements allow for individual derivative contracts with a single counterparty to offset in the event of default. For presentation on the condensed consolidated balance sheets, we do not offset fair value amounts recognized for derivative instruments or the accrued interest related to cross-currency interest rate swaps under master netting arrangements. The following table presents information related to these offsetting arrangements, inclusive of accrued interest (in millions):
| Gross Amounts |  | Gross Amounts Offset in the Balance Sheets |  | Net Amounts |  | Gross Amounts Not Offset in the Balance Sheets |  | Net
March 31, 2025 |  |  |  |  |  |  |  |  |
Derivative assets | $ | 365 |  |  | $ | — |  |  | $ | 365 |  |  | $ | (76) |  |  | $ | 289 |
Derivative liabilities | 94 |  |  | — |  |  | 94 |  |  | (76) |  |  | 18 |
December 31, 2024 |  |  |  |  |  |  |  |  |
Derivative assets | $ | 605 |  |  | $ | — |  |  | $ | 605 |  |  | $ | (75) |  |  | $ | 530 |
Derivative liabilities | 79 |  |  | — |  |  | 79 |  |  | (75) |  |  | 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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