XML 38 R23.htm IDEA: XBRL DOCUMENT
v3.22.4

Derivative Financial Instruments | 12 Months Ended
--- | ---
Dec. 31, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | Derivative Financial Instruments Risk Management Objective of Using Derivatives We are exposed to certain risks arising from both our business operations and economic conditions, and we principally manage our exposures to these risks through management of our core business activities. Certain of our foreign operations expose us to fluctuations of foreign interest rates and exchange rates that may impact revenue, expenses, cash receipts, cash payments, and the value of our stockholders' equity. We enter into derivative financial instruments to protect the value or fix the amount of certain cash flows in terms of the functional currency of the business unit with that exposure and reduce the volatility in stockholders' equity. Cash Flow Hedges of Foreign Exchange Risk We are exposed to fluctuations in various foreign currencies against our functional currencies. We use foreign currency derivatives, including currency forward agreements, to manage our exposure to fluctuations in the various exchange rates. Currency forward agreements involve fixing the foreign currency exchange rate for delivery of a specified amount of foreign currency on a specified date. Certain business units with exposure to foreign currency exchange risks have designated certain currency forward agreements as cash flow hedges of forecasted intercompany inventory purchases and sales. Our principal currency exposures relate to the Euro, Swedish Krona, British Pound, Canadian Dollar, Australian Dollar and Polish Zloty. We had foreign exchange contracts with purchase notional amounts totaling $255 million and $301 million as of December 31, 2022 and 2021, respectively. As of December 31, 2022, our most significant foreign currency derivatives included contracts to sell U.S. Dollar and purchase Euro, purchase Swedish Krona and sell Euro, sell British Pound and purchase Euro, purchase U.S. Dollar and sell Canadian Dollar, purchase Polish Zloty and sell Euro, sell Canadian Dollar and purchase Euro and to sell Australian Dollar and purchase Euro. The purchased notional amounts associated with these currency derivatives are $105 million, $73 million, $29 million, $13 million, $13 million, $13 million and $9 million, respectively. As of December 31, 2021 the purchased notional amounts associated with these currency derivatives were $130 million,$88 million, $31 million, $14 million, $11 million, $14 million and $13 million, respectively. Hedges of Net Investments in Foreign Operations We are exposed to changes in foreign currencies impacting our net investments held in foreign subsidiaries. Cross-Currency Swaps Beginning in 2015, we entered into cross-currency swaps to manage our exposure to fluctuations in the Euro-U.S. Dollar exchange rate. During the second quarter of 2019 and third quarter of 2020 we entered into additional cross-currency swaps. The total notional amount of derivative instruments designated as net investment hedges was and $1,616 million and $1,151 million as of December 31, 2022 and 2021, respectively. Foreign Currency Denominated Debt On March 11, 2016, we issued 2.250% Senior Notes of €500 million aggregate principal amount due March 2023. On June 2, 2022, we de-designated the entirety of the outstanding balance of the €500 million 2.250% Senior Notes, or $533 million from the net investment hedge relationship. Previously, the entirety of the outstanding balance, or $563 million as of December 31, 2021, net of unamortized discount, was designated as a hedge of a net investment in certain foreign subsidiaries. Fair Value Hedges of Foreign Exchange Risk The de-designation of our 2.250% Senior Notes of €500 million resulted in exposure to fluctuations in the Euro-U.S. Dollar exchange rate. We use currency forward agreements to manage our exposure to fluctuations in the Euro-U.S. Dollar exchange rate. Currency forward agreements involve fixing the foreign currency exchange rate for delivery of a specified amount of foreign currency on a specified date. On June 2, 2022, we entered into a currency forward agreement with a total notional amount of €500 million, designating the agreement as a fair value hedge of our Euro denominated notes. On December 12, 2022 the currency forward agreement matured. Effectiveness of derivatives designated as fair value hedges is assessed using the spot method. The changes in the fair value of these derivatives due to movements in spot exchange rates are recorded in Selling, general and administrative expenses. Changes in the fair value of the 2.250% Senior Notes of €500 million related to spot exchange rates are also recorded in Selling, general and administrative expenses. Changes in the spot-forward differential and counterparty non-performance risk of the derivatives are excluded from the assessment of hedge effectiveness and will be recognized in AOCL. Amounts in AOCL are recognized in earnings, specifically Interest expense, using a systematic and rational method over the life of the hedging instrument. The table below presents the effect of our derivative financial instruments on the Consolidated Income Statements and Consolidated Statements of Comprehensive Income:
|  | Year Ended December 31,
(in millions) |  | 2022 |  | 2021 |  | 2020
Derivatives in Cash Flow Hedges |  |  |  |  |  |
Foreign Exchange Contracts |  |  |  |  |  |
Amount of gain (loss) recognized in OCI/L |  | $ | (24) |  |  | $ | (10) |  |  | $ | 9 |
Amount of (gain) loss reclassified from OCI/L into revenue |  | 19 |  |  | 4 |  |  | (4) |
Amount of loss reclassified from OCI/L into cost of revenue |  | 2 |  |  | — |  |  | 1 |
Derivatives in Net Investment Hedges |  |  |  |  |  |
Cross-Currency Swaps |  |  |  |  |  |
Amount of (loss) gain recognized in OCI/L |  | $ | 94 |  |  | $ | 94 |  |  | $ | (103) |
Amount of income recognized in Interest Expense |  | 29 |  |  | 21 |  |  | 19 |
Foreign Currency Denominated Debt |  |  |  |  |  |
Amount of (loss) gain recognized in OCI/L |  | $ | 31 |  |  | $ | 48 |  |  | $ | (55) |
Fair Value Hedges |  |  |  |  |  |
Foreign Exchange Contracts |  |  |  |  |  |
Amount of (loss) recognized in Selling, general and administrative expenses |  | $ | (7) |  |  | $ | — |  |  | $ | — |
Amount recognized in Interest expense |  | (3) |  |  | — |  |  | — |
As of December 31, 2022, $6 million of the net losses on cash flow hedges are expected to be reclassified into earnings in the next 12 months. As of December 31, 2022, no gains or losses on the net investment hedges are expected to be reclassified into earnings over their duration. The fair values of our derivative assets and liabilities are measured on a recurring basis using Level 2 inputs and are determined through the use of models that consider various assumptions including yield curves, time value and other measurements. The fair values of our derivative contracts currently included in our hedging program were as follows:
| December 31,
(in millions) | 2022 |  | 2021
Derivatives designated as hedging instruments |  |  |
Assets |  |  |
Net Investment Hedges |  |  |
Other non-current assets | 79 |  |  | 8 |
Liabilities |  |  |
Cash Flow Hedges |  |  |
Other current liabilities | — |  |  | (1) |
Net Investment Hedges |  |  |
Other non-current liabilities | (6) |  |  | (26) |
Our long-term debt, due in 2023, was de-designated from the hedging relationship in June 2022.The fair value of our long-term debt designated as a net investment hedge was $577 million as of December 31, 2021.

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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 https://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 https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration