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Derivative Instruments | 12 Months Ended
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Dec. 31, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments |
Note 10: | Derivative Instruments
Foreign Currency Forward Contracts - Hedging Instruments Due to the global nature of our operations, portions of our revenue and operating expense are recorded in currencies other than the U.S. dollar. The value of revenue and operating expense measured in U.S. dollars is therefore subject to changes in foreign currency exchange rates. We enter into foreign currency forward contracts and foreign currency options with financial institutions with the primary objective to mitigate the impact of foreign currency exchange rate fluctuations on our international revenue and operating expense. Foreign currency forward contracts and foreign currency options in effect as of December 31, 2022 and 2021, had durations of 1 to 12 months and 1 to 15 months, respectively. These contracts have been designated as cash flow hedges and unrealized gains and losses on the portion of these foreign currency forward contracts and foreign currency options that are included in the effectiveness test are reported in accumulated other comprehensive income (loss) (referred to as AOCI in the table below). Realized gains and losses of such contracts are recognized in revenue when the sale of product in the currency being hedged is recognized and in operating expense when the expense in the currency being hedged is recorded. We recognize all cash flow hedge reclassifications from accumulated other comprehensive income (loss) and fair value changes of excluded portions in the same line item in our consolidated statements of income that have been impacted by the hedged item. The notional amount of foreign currency forward contracts and foreign currency options that were entered into to hedge forecasted revenue and operating expense is summarized as follows:
|  | Notional Amount As of December 31,
(In millions) |  | 2022 |  | 2021
Euro |  | $ | 1,495.5 |  |  | $ | 1,828.0 |
British pound |  | 162.8 |  |  | 166.2 |
Japanese yen |  | — |  |  | 72.7 |
Canadian dollar |  | 57.2 |  |  | 59.9 |
Total foreign currency forward contracts |  | $ | 1,715.5 |  |  | $ | 2,126.8 |
The pre-tax portion of the fair value of these foreign currency forward contracts and foreign currency options that were included in accumulated other comprehensive income (loss) in total equity is summarized as follows:
|  | For the Years Ended December 31,
(In millions) |  | 2022 |  | 2021 |  | 2020
Unrealized gains |  | $ | 29.9 |  |  | $ | 60.8 |  |  | $ | — |
Unrealized (losses) |  | (21.3) |  |  | (7.0) |  |  | (212.5) |
Net unrealized gains (losses) |  | $ | 8.6 |  |  | $ | 53.8 |  |  | $ | (212.5) |
We expect the net unrealized gains of approximately $8.6 million to be settled over the next 12 months, with any amounts in accumulated other comprehensive income (loss) to be reported as an adjustment to revenue or operating expense. We consider the impact of our and our counterparties’ credit risk on the fair value of the contracts as well as the ability of each party to execute its contractual obligations. As of December 31, 2022 and 2021, credit risk did not materially change the fair value of our foreign currency forward contracts. The following table summarizes the effect of foreign currency forward contracts designated as hedging instruments in our consolidated statements of income:
For the Years Ended December 31,
Net Gains/(Losses) Reclassified from AOCI into Operating Income (in millions) |  | Net Gains/(Losses) Recognized in Operating Income (in millions)
Location |  | 2022 |  | 2021 |  | 2020 |  | Location |  | 2022 |  | 2021 |  | 2020
Revenue |  | $ | 201.6 |  |  | $ | (60.0) |  |  | $ | 18.3 |  |  | Revenue |  | $ | (8.6) |  |  | $ | (8.4) |  |  | $ | (9.9) |
Operating expense |  | (5.5) |  |  | (0.8) |  |  | 3.3 |  |  | Operating expense |  | — |  |  | — |  |  | — |
Interest Rate Contracts - Hedging Instruments We have entered into interest rate lock contracts or interest rate swap contracts on certain borrowing transactions to manage our exposure to interest rate changes and to reduce our overall cost of borrowing. Interest Rate Swap Contracts In connection with the issuance of our 2.90% Senior Notes due September 15, 2020, we entered into interest rate swaps with an aggregate notional amount of $675.0 million, which were originally set to expire on September 15, 2020. The interest rate swap contracts were designated as hedges of the fair value changes in our 2.90% Senior Notes attributable to changes in interest rates. In May 2020 we settled our interest rate swap contracts, in conjunction with our early redemption of our 2.90% Senior Notes, resulting in a gain of approximately $3.3 million, which was recorded as a component of interest expense in our consolidated statements of income during the year ended December 31, 2020. Net Investment Hedges - Hedging Instruments In February 2012 we entered into a joint venture agreement with Samsung BioLogics establishing an entity, Samsung Bioepis, to develop, manufacture and market biosimilar products. In June 2018 we exercised our option under our joint venture agreement to increase our ownership percentage in Samsung Bioepis from approximately 5.0% to approximately 49.9%. The share purchase transaction was completed in November 2018 and, upon closing, we paid 759.5 billion South Korean won ($676.6 million) to Samsung BioLogics. Our investment in the equity of Samsung Bioepis related to this transaction was exposed to the currency fluctuations in the South Korean won. In order to mitigate these currency fluctuations between the U.S. dollar and South Korean won, we entered into foreign currency forward contracts. These contracts were designated as net investment hedges. In April 2022 we completed the sale of our 49.9% equity interest in Samsung Bioepis to Samsung BioLogics and closed these foreign currency forward contracts. Upon completing this sale, the cumulative gains on our net investment hedges of $57.0 million were reclassified from accumulated other comprehensive income (loss) and reflected within the total pre-tax gain recognized from the sale, which was recorded in other (income) expense, net in our consolidated statements of income. For additional information on the sale of our equity interest in Samsung Bioepis please read Note 3, Dispositions, to these consolidated financial statements. Prior to the sale of our 49.9% equity interest in Samsung Bioepis, we recognized changes in the spot exchange rate of these foreign currency forward contracts in accumulated other comprehensive income (loss). The pre-tax portion of the fair value of these foreign currency forward contracts that were included in accumulated other comprehensive income (loss) in total equity reflected net gains of $10.6 million as of December 31, 2021. We excluded fair value changes related to the forward rate from our hedging relationship and amortized the forward points in other (income) expense, net in our consolidated statements of income over the term of the contract. The pre-tax portion of the fair value of the forward points that were included in accumulated other comprehensive income (loss) in total equity reflected net losses of $3.6 million as of December 31, 2021. The following table summarizes the effect of our net investment hedges in our consolidated financial statements:
For the Years Ended December 31,
Net Gains/(Losses) Recognized in Other Comprehensive Income (Effective Portion) (in millions) |  | Net Gains/(Losses) Recognized in Other Comprehensive Income (Amounts Excluded from Effectiveness Testing) (in millions) |  | Net Gains/(Losses) Recognized in Net Income (Amounts Excluded from Effectiveness Testing) (in millions)
Location |  | 2022 |  | 2021 |  | 2020 |  | Location |  | 2022 |  | 2021 |  | 2020 |  | Location |  | 2022 |  | 2021 |  | 2020
Gains (losses) on net investment hedge(1) |  | $ | 20.4 |  |  | $ | 46.0 |  |  | $ | (35.1) |  |  | Gains (losses) on net investment hedge(1) |  | $ | (3.2) |  |  | $ | (3.2) |  |  | $ | 4.5 |  |  | Other (income) expense(1) |  | $ | (4.6) |  |  | $ | (0.6) |  |  | $ | 2.9 |
(1) Beginning in the second quarter of 2022 we no longer held net investment hedges as they were closed with the sale of our 49.9% equity interest in Samsung Bioepis in April 2022. For additional information on the sale of our equity interest in Samsung Bioepis, please read Note 3, Dispositions, to these consolidated financial statements. For additional information on our collaboration arrangements with Samsung Bioepis, please read Note 19, Collaborative and Other Relationships, to these consolidated financial statements. Foreign Currency Forward Contracts - Other Derivative Instruments We also enter into other foreign currency forward contracts, usually with durations of one month or less, to mitigate the foreign currency risk related to certain balance sheet positions. We have not elected hedge accounting for these transactions. The aggregate notional amount of these outstanding foreign currency forward contracts was $1,238.8 million and $1,268.0 million as of December 31, 2022 and 2021, respectively. Net losses of $34.7 million, net losses of $43.3 million and net gains of $30.1 million related to these contracts were recorded as a component of other (income) expense, net for the years ended December 31, 2022, 2021 and 2020, respectively. Summary of Derivative Instruments While certain of our derivative instruments are subject to netting arrangements with our counterparties, we do not offset derivative assets and liabilities in our consolidated balance sheets. The amounts in the table below would not be substantially different if the derivative assets and liabilities were offset. The following table summarizes the fair value and presentation in our consolidated balance sheets of our outstanding derivative instruments, including those designated as hedging instruments:
|  |  |  | As of December 31,
(In millions) |  | Balance Sheet Location |  | 2022 |  | 2021
Cash Flow Hedging Instruments: |  |  |  |  |  |
Asset derivative instruments |  | Other current assets |  | $ | 37.9 |  |  | $ | 66.2 |
|  | Investments and other assets |  | — |  |  | 5.5 |
Liability derivative instruments |  | Accrued expense and other |  | 18.4 |  |  | 6.6 |
Net Investment Hedging Instruments:(1) |  |  |  |  |  |
Asset derivative instruments |  | Other current assets |  | — |  |  | 4.1 |
Other Derivative Instruments: |  |  |  |  |  |
Asset derivative instruments |  | Other current assets |  | 25.1 |  |  | 5.1 |
Liability derivative instruments |  | Accrued expense and other |  | 7.6 |  |  | 4.2 |
(1) Beginning in the second quarter of 2022 we no longer held net investment hedges as they were closed with the sale of our 49.9% equity interest in Samsung Bioepis in April 2022. For additional information on the sale of our equity interest in Samsung Bioepis, please read Note 3, Dispositions, to these consolidated financial statements.

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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 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
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