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Derivative Instruments and Hedging | 9 Months Ended
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Sep. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments and Hedging | Derivative Instruments and Hedging The Company has a portion of its business denominated and transacted in foreign currencies, which subjects the Company to foreign exchange risk, and uses derivative instruments to manage financial exposures that occur in the normal course of business. The Company does not hold or issue derivatives for trading or speculative purposes. The Company may elect to designate certain derivatives to partially offset its business exposure to foreign exchange risk. However, the Company may choose not to hedge certain exposures for a variety of reasons including accounting considerations or the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign exchange rates. Foreign Exchange Risk To protect revenue from fluctuations in foreign currency exchange rates, the Company may enter into forward contracts, option contracts, or other instruments, and may designate these instruments as cash flow hedges. The Company generally hedges portions of its forecasted foreign currency exposure associated with revenue, typically for up to 18 months. In the first quarter of 2023, the Company initiated a foreign exchange cash flow hedging program to minimize the effects of foreign currency fluctuations on future revenue. The Company may also enter into derivative instruments that are not designated as accounting hedges to offset a portion of the foreign currency exchange gains and losses generated by the remeasurement of certain assets and liabilities denominated in non-functional currencies. The following table summarizes the effect of derivative instruments on the Company’s condensed consolidated balance sheets (in millions):
| Derivative Assets(1)
| Location | December 31, 2022 | September 30, 2023
Derivatives designated as hedging instruments: |  |  |
Foreign exchange contracts (current) | Prepaids and other current assets | $ | — |  | $ | 40 |
Foreign exchange contracts (noncurrent) | Other assets, noncurrent | — |  | 4 |
Total derivatives designated as hedging instruments |  | $ | — |  | $ | 44 |
Derivatives not designated as hedging instruments: |  |  |
Foreign exchange contracts (current) | Prepaids and other current assets | $ | 14 |  | $ | 58 |
Total derivatives not designated as hedging instruments |  | $ | 14 |  | $ | 58 |
| Derivative Liabilities(1)
| Location | December 31, 2022 | September 30, 2023
Derivatives not designated as hedging instruments: |  |  |
Foreign exchange contracts (current) | Accrued expenses and other current liabilities | $ | 31 |  | $ | 10 |
Total derivatives not designated as hedging instruments |  | $ | 31 |  | $ | 10 |
(1)Derivative assets and derivatives liabilities are measured using Level 2 inputs. To limit credit risk, the Company generally enters into master netting arrangements with the respective counterparties to the Company’s derivative contracts, under which the Company is allowed to settle transactions with a single net amount payable by one party to the other. As of September 30, 2023, the potential effect of these rights of off-set associated with the Company’s derivative contracts would be a reduction to both derivative assets and liabilities of $9 million, resulting in net derivative assets of $92 million. The effect of derivative instruments designated as hedging instruments on the condensed consolidated statements of operations was not material for the three and nine months ended September 30, 2023. Effect of derivative instruments designated as hedging instruments on AOCI The following table summarizes the activity of derivative instruments designated as cash flow hedges and the impact of these derivative contracts on AOCI, net of tax (in millions):
|  | Gain Recognized in Other Comprehensive Income (Loss) |  |
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |  |  |  |
|  | 2023 |  |  | 2023 |  |  |  |  |  |
Derivatives designated as cash flow hedges: |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  | $ | 36 |  |  |  | $ | 34 |  |  |  |  |  |  |
Total designated cash flow hedges |  | $ | 36 |  |  |  | $ | 34 |  |  |  |  |  |  |
As of September 30, 2023, cumulative unrealized gains recorded in AOCI, net of tax related to derivative instruments designated as hedging instruments were $35 million. Effect of derivative instruments not designated as hedging instruments on the condensed consolidated statements of operations The following table presents the activity of derivative instruments not designated as hedging instruments and the impact of these derivative contracts on the condensed consolidated statements of operations (in millions):
| Realized Gain (Loss) on Derivatives |  | Unrealized Gain on Derivatives
| Three Months Ended September 30, |  | Nine Months Ended September 30, |  | Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2022 | 2023 |  | 2022 | 2023 |  | 2022 | 2023 |  | 2022 | 2023
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts | $ | 61 |  | $ | (7) |  |  | $ | 101 |  | $ | (91) |  |  | $ | 13 |  | $ | 54 |  |  | $ | 38 |  | $ | 66 |
Total derivatives not designated as hedging instruments | $ | 61 |  | $ | (7) |  |  | $ | 101 |  | $ | (91) |  |  | $ | 13 |  | $ | 54 |  |  | $ | 38 |  | $ | 66 |
Cash flow hedges The total notional amount of outstanding foreign currency derivatives designated as cash flow hedges was $1.4 billion as of September 30, 2023. Derivatives not designated as hedging instruments The total notional amount of outstanding derivatives not designated as hedging instruments was $2.4 billion and $3.1 billion as of December 31, 2022 and September 30, 2023, respectively.

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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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