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DERIVATIVE INSTRUMENTS | 9 Months Ended
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Sep. 30, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE INSTRUMENTS | DERIVATIVE INSTRUMENTS The Company maintains various agreements with bank counterparties that permit the Company to enter into "over-the-counter" derivative instrument agreements to manage its risk associated with interest rates and foreign currency fluctuations. In February 2020, the Company entered into certain derivative instrument agreements to manage its risk associated with interest rates on its 1.85% Notes and foreign currency fluctuations in connection with its foreign currency-denominated intercompany financing arrangements. The Company did not enter into these agreements for trading or speculative purposes. Fair value hedges The Company uses fair value hedges primarily to hedge a portion of its fixed-rate long-term debt via interest rate swaps. Changes in the fair value of the interest rate swap, along with the gain or loss on the hedged item, is recorded in earnings under the same line item, interest expense, net. The notional amount of the Company’s outstanding fair value hedges as of September 30, 2021 and December 31, 2020 was $500 million. Cash flow hedges The Company uses cash flow hedges primarily to hedge the exposure to variability in forecasted cash flows from foreign currency-denominated intercompany borrowings via cross-currency swaps. Gains or losses on the cross-currency swaps are reported as a component of Accumulated other comprehensive earnings (losses) (AOCE) and reclassified into earnings in the same period during which the hedged transaction affects earnings. The notional amount of the Company’s outstanding cash flow hedges as of September 30, 2021 and December 31, 2020 was approximately $34 million. The effect of the Company's fair value and cash flow hedges on the Company's Condensed Consolidated Statement of Earnings for the three and nine months ended September 30, 2021 and 2020 is as follows (in millions of dollars):
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2021 |  | 2020 |  | 2021 |  | 2020
|  | Interest expense, net |  | Other, net |  | Interest expense, net |  | Other, net |  | Interest expense, net |  | Other, Net |  | Interest expense, net |  | Other, Net
Gain or (loss) recognized in earnings |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fair value hedge: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Hedged item |  | $ | 3 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 12 |  |  | $ | — |  |  | $ | (22) |  |  | $ | — |
Interest rate swap designated as hedging instrument |  | $ | (3) |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (12) |  |  | $ | — |  |  | $ | 22 |  |  | $ | — |
Cash flow hedge: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Hedged item |  | $ | — |  |  | $ | (1) |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Cross-currency swap designated as hedging instrument |  | $ | — |  |  | $ | 1 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
The effect of the Company’s fair value and cash flow hedges on AOCE for the three and nine months ended September 30, 2021 and 2020 was not material. The fair value and carrying amounts of outstanding derivative instruments in the Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 were as follows (in millions of dollars):
|  |  | As of September 30, 2021 |  | As of December 31, 2020
| Balance Sheet Classification |  | Fair Value and Carrying Amounts |  | Fair Value and Carrying Amounts
Cross-currency swap | Other non-current liabilities |  | $ | 2 |  |  | $ | 2 |
Interest rate swap | Other assets |  | $ | 9 |  |  | $ | 21 |
The carrying amount of the liability hedged by the interest rate swap (long-term debt), including the cumulative amount of fair value hedging adjustments, as of September 30, 2021 and December 31, 2020 amounted to $509 million and $521 million, respectively. The estimated fair values of the Company's derivative instruments were based on quoted market forward rates, which are classified as Level 2 within the fair value hierarchy and reflect the present value of the amount that the Company would pay for contracts involving the same notional amounts and maturity dates. No adjustments were required during the current period to reflect the counterparty’s credit risk and/or the Company’s own nonperformance risk.

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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 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
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