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Derivatives And Hedging Activities | 9 Months Ended
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Sep. 30, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments and Hedging Activities | DERIVATIVES AND HEDGING ACTIVITIES Cash Flow Hedges Aptiv is exposed to market risk, such as fluctuations in foreign currency exchange rates, commodity prices and changes in interest rates, which may result in cash flow risks. To manage the volatility relating to these exposures, Aptiv aggregates the exposures on a consolidated basis to take advantage of natural offsets. For exposures that are not offset within its operations, Aptiv enters into various derivative transactions pursuant to its risk management policies, which prohibit holding or issuing derivative financial instruments for speculative purposes, and designation of derivative instruments is performed on a transaction basis to support hedge accounting. The changes in fair value of these hedging instruments are offset in part or in whole by corresponding changes in the fair value or cash flows of the underlying exposures being hedged. Aptiv assesses the initial and ongoing effectiveness of its hedging relationships in accordance with its documented policy. As of September 30, 2018, the Company had the following outstanding notional amounts related to commodity and foreign currency forward and option contracts designated as cash flow hedges that were entered into to hedge forecasted exposures:
Commodity | Quantity Hedged |  | Unit of Measure |  | Notional Amount (Approximate USD Equivalent)
| (in thousands) |  | (in millions)
Copper | 88,540 |  |  | pounds |  | $ | 240 |
Foreign Currency | Quantity Hedged |  | Unit of Measure |  | Notional Amount (Approximate USD Equivalent)
| (in millions)
Mexican Peso | 9,815 |  |  | MXN |  | $ | 520 |
Chinese Yuan Renminbi | 2,166 |  |  | RMB |  | 315 |
Polish Zloty | 424 |  |  | PLN |  | 115 |
New Turkish Lira | 83 |  |  | TRY |  | 15 |
As of September 30, 2018, Aptiv has entered into derivative instruments to hedge cash flows extending out to September 2020. Gains and losses on derivatives qualifying as cash flow hedges are recorded in other comprehensive income (“OCI”), to the extent that hedges are effective, until the underlying transactions are recognized in earnings. Unrealized amounts in accumulated OCI will fluctuate based on changes in the fair value of hedge derivative contracts at each reporting period. Net losses on cash flow hedges included in accumulated OCI as of September 30, 2018 were $1 million ($4 million gain, net of tax). Of this total, approximately $2 million of losses are expected to be included in cost of sales within the next 12 months and $1 million of gains are expected to be included in cost of sales in subsequent periods. Cash flow hedges are discontinued when Aptiv determines it is no longer probable that the originally forecasted transactions will occur. The amount included in cost of sales related to hedge ineffectiveness was insignificant for the three and nine months ended September 30, 2018 and 2017. Cash flows from derivatives used to manage commodity and foreign exchange risks designated as cash flow hedges are classified as operating activities within the consolidated statement of cash flows. Net Investment Hedges The Company is also exposed to the risk that adverse changes in foreign currency exchange rates could impact its net investment in non-U.S. subsidiaries. To manage this risk, the Company designates certain qualifying derivative and non-derivative instruments, including foreign currency forward contracts and foreign currency-denominated debt, as net investment hedges of certain non-U.S. subsidiaries. The effective portion of the gains or losses on instruments designated as net investment hedges are recognized within OCI to offset changes in the value of the net investment in these foreign currency-denominated operations. Any ineffective portion of gains or losses on net investment hedges are reclassified to other income (expense), net within the consolidated statement of operations. Gains and losses reported in accumulated other comprehensive income (loss) are reclassified to earnings only when the related currency translation adjustments are required to be reclassified, usually upon sale or liquidation of the investment. Cash flows from derivatives designated as net investment hedges are classified as investing activities within the consolidated statement of cash flows. Since the first quarter of 2016, the Company has entered into a series of forward contracts, each of which have been designated as net investment hedges of the foreign currency exposure of the Company’s investments in certain Chinese Yuan Renminbi (“RMB”)-denominated subsidiaries. In December 2016, the Company entered into a forward contract with a notional amount of 1.8 billion RMB (approximately $265 million, using December 31, 2016 foreign currency rates), which matured in June 2017, and the Company paid $12 million at settlement. In June 2017, the Company entered into a forward contract with a notional amount of 2.4 billion RMB (approximately $345 million, using June 30, 2017 foreign currency rates), which matured in December 2017, and the Company paid $16 million at settlement. In December 2017, the Company entered into a forward contract with a notional amount of 1.9 billion RMB (approximately $290 million, using December 31, 2017 foreign currency rates), which matured in June 2018, and the Company paid $10 million at settlement. In June 2018, the Company entered into a forward contract with a notional amount of 486 million RMB (approximately $75 million, using June 30, 2018 foreign currency rates), which matures in December 2018. Refer to the tables below for details of the fair value recorded in the consolidated balance sheet and the effects recorded in the consolidated statement of comprehensive income related to these derivative instruments. The Company has designated the €700 million 2015 Euro-denominated Senior Notes and the €500 million 2016 Euro-denominated Senior Notes, as more fully described in Note 8. Debt, as net investment hedges of the foreign currency exposure of its investments in certain Euro-denominated subsidiaries. Due to changes in the value of the Euro-denominated debt instruments designated as net investment hedges, during the three and nine months ended September 30, 2018, $22 million of losses and $31 million of gains, respectively, were recognized within the cumulative translation adjustment component of OCI. During the three and nine months ended September 30, 2017, $44 million and $147 million, respectively, of losses were recognized within the cumulative translation adjustment component of OCI. Cumulative losses included in accumulated OCI on these net investment hedges were $86 million as of September 30, 2018 and $117 million as of December 31, 2017. There were no amounts reclassified or recognized for ineffectiveness during the three and nine months ended September 30, 2018 or 2017. Derivatives Not Designated as Hedges In certain occasions the Company enters into certain foreign currency and commodity contracts that are not designated as hedges. When hedge accounting is not applied to derivative contracts, gains and losses are recorded to other income (expense), net and cost of sales in the consolidated statement of operations. In conjunction with the acquisition of KUM, as more fully disclosed in Note 17. Acquisitions and Divestitures, in March 2018, the Company entered into forward contracts, requiring no initial net investment, with notional amounts totaling 559 billion South Korean Won (“KRW”) (approximately $520 million using March 1, 2018 foreign currency rates) to hedge portions of the currency risk associated with the cash payment for the acquisition. Pursuant to the requirements of ASC 815, Derivatives and Hedging, the forwards did not qualify as hedges for accounting purposes, and therefore, changes in the fair value of the forwards were recognized in other income (expense), net. In conjunction with the closing of the acquisition, Aptiv settled the forward contracts in the second quarter of 2018 and received $4 million, which is reflected within investing activities from continuing operations in the consolidated statement of cash flows. During the nine months ended September 30, 2018, the change in fair value resulted in a pre-tax gain of $4 million, included within other income in the consolidated statement of operations. Fair Value of Derivative Instruments in the Balance Sheet The fair value of derivative financial instruments recorded in the consolidated balance sheets as of September 30, 2018 and December 31, 2017 are as follows:
| Asset Derivatives |  | Liability Derivatives |  | Net Amounts of Assets and (Liabilities) Presented in the Balance Sheet
| Balance Sheet Location |  | September 30, 2018 |  | Balance Sheet Location |  | September 30, 2018 |  | September 30, 2018
| (in millions)
Derivatives designated as cash flow hedges: |  |  |  |  |  |  |  |
Commodity derivatives | Other current assets |  | $ | 1 |  |  | Accrued liabilities |  | $ | 8 |  |  |
Foreign currency derivatives* | Other current assets |  | 16 |  |  | Other current assets |  | 4 |  |  | $ | 12 |
Foreign currency derivatives* | Accrued liabilities |  | 4 |  |  | Accrued liabilities |  | 5 |  |  | (1 | )
Commodity derivatives | Other long-term assets |  | — |  |  | Other long-term liabilities |  | 5 |  |  |
Foreign currency derivatives* | Other long-term assets |  | 8 |  |  | Other long-term assets |  | 1 |  |  | 7 |
Foreign currency derivatives* | Other long-term liabilities |  | — |  |  | Other long-term liabilities |  | 1 |  |  | (1 | )
Derivatives designated as net investment hedges: |  |  |  |  |  |  |  |
Foreign currency derivatives | Other current assets |  | 4 |  |  | Accrued liabilities |  | — |  |  |  |
Total derivatives designated as hedges |  | $ | 33 |  |  |  |  | $ | 24 |  |  |
| Asset Derivatives |  | Liability Derivatives |  | Net Amounts of Assets and (Liabilities) Presented in the Balance Sheet
| Balance Sheet Location |  | December 31, 2017 |  | Balance Sheet Location |  | December 31, 2017 |  | December 31, 2017
| (in millions)
Derivatives designated as cash flow hedges: |  |  |  |  |  |  |  |
Commodity derivatives | Other current assets |  | $ | 27 |  |  | Accrued liabilities |  | $ | — |  |  |
Foreign currency derivatives* | Other current assets |  | 3 |  |  | Other current assets |  | — |  |  | $ | 3 |
Foreign currency derivatives* | Accrued liabilities |  | 7 |  |  | Accrued liabilities |  | 17 |  |  | (10 | )
Commodity derivatives | Other long-term assets |  | 8 |  |  | Other long-term liabilities |  | — |  |  |
Foreign currency derivatives* | Other long-term liabilities |  | — |  |  | Other long-term liabilities |  | 11 |  |  | (11 | )
Derivatives designated as net investment hedges: |  |  |  |  |  |  |  |
Foreign currency derivatives | Other current assets |  | — |  |  | Accrued liabilities |  | 5 |  |  |
Total derivatives designated as hedges |  | $ | 45 |  |  |  |  | $ | 33 |  |  |
* | Derivative instruments within this category are subject to master netting arrangements and are presented on a net basis in the consolidated balance sheets in accordance with accounting guidance related to the offsetting of amounts related to certain contracts.
The fair value of Aptiv’s derivative financial instruments was in a net asset position as of September 30, 2018 and December 31, 2017. Effect of Derivatives on the Statement of Operations and Statement of Comprehensive Income The pre-tax effect of derivative financial instruments in the consolidated statement of operations and consolidated statement of comprehensive income for the three months ended September 30, 2018 is as follows:
Three Months Ended September 30, 2018 | (Loss) Gain Recognized in OCI (Effective Portion) |  | Gain (Loss) Reclassified from OCI into Income (Effective Portion) |  | Gain Recognized in Income (Ineffective Portion Excluded from Effectiveness Testing)
| (in millions)
Derivatives designated as cash flow hedges: |  |  |  |  |
Commodity derivatives | $ | (14 | ) |  | $ | 1 |  |  | $ | — |
Foreign currency derivatives | 33 |  |  | (2 | ) |  | — |
Derivatives designated as net investment hedges: |  |  |  |  |
Foreign currency derivatives | 3 |  |  | — |  |  | — |
Total | $ | 22 |  |  | $ | (1 | ) |  | $ | — |
| Gain Recognized in Income
| (in millions)
Derivatives not designated: |
Foreign currency derivatives | $ | — |
Total | $ | — |
The pre-tax effect of derivative financial instruments in the consolidated statement of operations and consolidated statement of comprehensive income for the three months ended September 30, 2017 is as follows:
Three Months Ended September 30, 2017 | Gain (Loss) Recognized in OCI (Effective Portion) |  | Gain Reclassified from OCI into Income (Effective Portion) |  | Gain Recognized in Income (Ineffective Portion Excluded from Effectiveness Testing)
| (in millions)
Derivatives designated as cash flow hedges: |  |  |  |  |
Commodity derivatives | $ | 15 |  |  | $ | 5 |  |  | $ | — |
Foreign currency derivatives | (13 | ) |  | 1 |  |  | — |
Derivatives designated as net investment hedges: |  |  |  |  |
Foreign currency derivatives | (10 | ) |  | — |  |  | — |
Total | $ | (8 | ) |  | $ | 6 |  |  | $ | — |
| Gain Recognized in Income
| (in millions)
Derivatives not designated: |
Foreign currency derivatives | $ | — |
Total | $ | — |
The pre-tax effect of derivative financial instruments in the consolidated statement of operations and consolidated statement of comprehensive income for the nine months ended September 30, 2018 is as follows:
Nine Months Ended September 30, 2018 | (Loss) Gain Recognized in OCI (Effective Portion) |  | Gain (Loss) Reclassified from OCI into Income (Effective Portion) |  | Gain Recognized in Income (Ineffective Portion Excluded from Effectiveness Testing)
| (in millions)
Derivatives designated as cash flow hedges: |  |  |  |  |
Commodity derivatives | $ | (33 | ) |  | $ | 16 |  |  | $ | — |
Foreign currency derivatives | 30 |  |  | (11 | ) |  | — |
Derivatives designated as net investment hedges: |  |  |  |  |
Foreign currency derivatives | (1 | ) |  | — |  |  | — |
Total | $ | (4 | ) |  | $ | 5 |  |  | $ | — |
| Gain Recognized in Income
| (in millions)
Derivatives not designated: |
Foreign currency derivatives | $ | 2 |
Total | $ | 2 |
The pre-tax effect of derivative financial instruments in the consolidated statement of operations and consolidated statement of comprehensive income for the nine months ended September 30, 2017 is as follows:
Nine Months Ended September 30, 2017 | Gain (Loss) Recognized in OCI (Effective Portion) |  | Gain (Loss) Reclassified from OCI into Income (Effective Portion) |  | Gain Recognized in Income (Ineffective Portion Excluded from Effectiveness Testing)
| (in millions)
Derivatives designated as cash flow hedges: |  |  |  |  |
Commodity derivatives | $ | 26 |  |  | $ | 8 |  |  | $ | — |
Foreign currency derivatives | 41 |  |  | (26 | ) |  | — |
Derivatives designated as net investment hedges: |  |  |  |  |
Foreign currency derivatives | (26 | ) |  | — |  |  | — |
Total | $ | 41 |  |  | $ | (18 | ) |  | $ | — |
| Loss Recognized in Income
| (in millions)
Derivatives not designated: |
Foreign currency derivatives | $ | (5 | )
Total | $ | (5 | )
The gain or loss reclassified from OCI into income for the effective portion of designated derivative instruments was recorded to cost of sales in the consolidated statements of operations for the three and nine months ended September 30, 2018 and 2017. The gain or loss recognized in income for non-designated derivative instruments was recorded to other income (expense), net and cost of sales in the consolidated statements of operations for the nine months ended September 30, 2018 and 2017, 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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