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DERIVATIVE INSTRUMENTS
 6 Months Ended
Jun. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE INSTRUMENTS DERIVATIVE INSTRUMENTS
The Company's earnings and cash flows are subject to fluctuations due to changes in foreign currency exchange rates and interest rates. Grainger currently enters into certain derivatives or other financial instruments to hedge against these risks, and may continue to do so in the future.

Fair Value Hedges
The Company uses interest rate swaps to hedge a portion of its fixed-rate long-term debt. These swaps are treated as fair value hedges and consequently the gain or loss on the derivative as well as the offsetting gain or loss on the hedged item, are recognized in the Consolidated Statements of Earnings in Interest expense – net. The notional amount of the Company’s outstanding fair value hedges as of June 30, 2023 and December 31, 2022 was $450 million and $500 million, respectively.

The liability hedged by the interest rate swaps is recorded on the Condensed Consolidated Balance Sheets in Long-term debt. As of June 30, 2023 and December 31, 2022, the carrying amount of the hedged item, including the cumulative amount of fair value hedging adjustments was $422 million and $466 million, respectively.

The effect of the Company's fair value hedges on the Condensed Consolidated Statements of Earnings in Interest expense – net is as follows (in millions of dollars):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Gain or (loss):
Interest rate swaps:
      Hedged item$2 $5 $(6)$24 
      Derivatives designated as hedging instrument$(2)$(5)$6 $(24)

The location and fair values of derivative instruments designated as hedging instruments in the Condensed Consolidated Balance Sheets as of June 30, 2023, are shown in the following table (in millions of dollars):
As of
June 30, 2023December 31, 2022
Interest rate swaps reported in Other non-current liabilities$25 $34 

Fair Value
The estimated fair values of the Company's derivative instruments were based on quoted market forward rates, which are classified as Level 2 inputs 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 or the Company’s own nonperformance risk.