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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 | Derivative Instruments In the normal course of business, we are exposed to risks arising from business operations and economic factors, including fluctuations in interest rates and foreign currencies. We use derivative instruments to manage the volatility related to these exposures. The objective of these derivative instruments is to reduce fluctuations in our earnings and cash flows associated with changes in foreign currency exchange rates and interest rates. These financial instruments are not used for trading or other speculative purposes. Historically, we have not incurred, and do not expect to incur in the future, any losses as a result of counterparty default. The fair value of our derivative instruments and the related notional amounts were as follows:
|  | December 31, 2022
|  |  |  | Derivative Assets |  | Derivative Liabilities
(In millions) |  | Notional Amount |  | Balance Sheet Caption |  | Fair Value |  | Balance Sheet Caption |  | Fair Value
Derivatives designated as hedges |  |  |  |  |  |  |  |  |  |
Cross-currency swap agreements |  | $ | 332 |  |  | Other current assets |  | $ | — |  |  | Other current liabilities |  | $ | (11) |
Cross-currency swap agreements |  | 68 |  |  | Other long-term assets |  | 3 |  |  | Other long-term liabilities |  | — |
Interest rate swaps |  | 1,882 |  |  | Other current assets |  | — |  |  | Other current liabilities |  | (1) |
Total |  |  |  |  |  | $ | 3 |  |  |  |  | $ | (12) |
|  | December 31, 2021
|  |  |  | Derivative Assets |  | Derivative Liabilities
(In millions) |  | Notional Amount |  | Balance Sheet Caption |  | Fair Value |  | Balance Sheet Caption |  | Fair Value
Derivatives designated as hedges |  |  |  |  |  |  |  |  |  |
Cross-currency swap agreements |  | $ | 362 |  |  | Other current assets |  | $ | — |  |  | Other current liabilities |  | $ | (4) |
Cross-currency swap agreements |  | 110 |  |  | Other long-term assets |  | — |  |  | Other long-term liabilities |  | — |
Interest rate swaps |  | 2,003 |  |  | Other current assets |  | — |  |  | Other current liabilities |  | — |
Total |  |  |  |  |  | $ | — |  |  |  |  | $ | (4) |
The derivatives are classified as Level 2 within the fair value hierarchy. The derivatives are valued using inputs other than quoted prices such as foreign exchange rates and yield curves. The effect of derivative and nonderivative instruments designated as hedges on our Consolidated Statements of Income was as follows:
|  | Amount of Gain (Loss) Recognized in Other Comprehensive Loss on Derivatives |  | Amount of Gain (Loss) Reclassified from AOCI into Net Income |  | Amount of Gain Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)
|  | Years Ended December 31,
(In millions) |  | 2022 |  | 2021 |  | 2020 |  | 2022 |  | 2021 |  | 2020 |  | 2022 |  | 2021 |  | 2020
Derivatives designated as cash flow hedges |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cross-currency swap agreements |  | $ | — |  |  | $ | 4 |  |  | $ | (12) |  |  | $ | — |  |  | $ | 7 |  |  | $ | (15) |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Interest rate swaps |  | — |  |  | — |  |  | (5) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Derivatives designated as net investment hedges |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cross-currency swap agreements |  | 27 |  |  | 84 |  |  | (81) |  |  | — |  |  | — |  |  | — |  |  | 7 |  |  | 6 |  |  | 9 |
Total |  | $ | 27 |  |  | $ | 88 |  |  | $ | (98) |  |  | $ | — |  |  | $ | 7 |  |  | $ | (15) |  |  | $ | 7 |  |  | $ | 6 |  |  | $ | 9 |
Cross-Currency Swap Agreements We enter into cross-currency swap agreements to manage the foreign currency exchange risk related to our international operations by effectively converting our fixed-rate USD-denominated debt, including the associated interest payments, to fixed-rate, euro (“EUR”)-denominated debt. The risk management objective of these transactions is to manage foreign currency risk relating to net investments in subsidiaries denominated in foreign currencies and reduce the variability in the functional currency equivalent cash flows of this debt. In 2021, in preparation for the GXO spin-off, we novated (or transferred) cross-currency swaps that were recorded as a liability with a fair value of approximately $28 million to GXO, as well as the associated amounts in AOCI. During the term of the swap contracts, we will receive interest, either on a quarterly or semi-annual basis, from the counterparties based on USD fixed interest rates, and we will pay interest, also on a quarterly or semi-annual basis, to the counterparties based on EUR fixed interest rates. At maturity, we will repay the original principal amount in EUR and receive the principal amount in USD. These agreements expire at various dates through 2024. We designated these cross-currency swaps as qualifying hedging instruments and account for them as net investment hedges. We apply the simplified method of assessing the effectiveness of our net investment hedging relationships. Under this method, for each reporting period, the change in the fair value of the cross-currency swaps is initially recognized in AOCI. The change in the fair value due to foreign exchange remains in AOCI and the initial component excluded from effectiveness testing will initially remain in AOCI and then will be reclassified from AOCI to Interest expense each period in a systematic manner. Cash flows related to the periodic exchange of interest payments for these net investment hedges are included in Cash flows from operating activities of continuing operations on our Consolidated Statements of Cash Flows. During 2022, we received approximately $29 million related to the settlement of certain cross currency swaps that matured during the period. The fair value adjustments related to these swaps remain in AOCI and partially offset foreign currency translation adjustment losses on our net investments in foreign subsidiaries. The proceeds were included in Cash flows from investing activities of continuing operations on our Consolidated Statements of Cash Flows. In 2021, prior to the spin-off of GXO, we entered into cross-currency swap agreements to manage the related foreign currency exposure from intercompany loans. We designated these cross-currency swaps as qualifying hedging instruments and accounted for them as cash flow hedges. Gains and losses resulting from the change in the fair value of the cross-currency swaps was initially recognized in AOCI and reclassified to Other income on our Consolidated Statements of Income to offset the foreign exchange impact in earnings created by settling intercompany loans. Cash flows related to these cash flow hedges was included in Cash flows from operating activities of continuing operations on our Consolidated Statements of Cash Flows. These swaps were re-designated as net investment hedges in the third quarter of 2021. Interest Rate Hedging We execute short-term interest rate swaps to mitigate variability in forecasted interest payments on our Senior Secured Term Loan Credit Agreement (the “Term Loan Credit Agreement”). The interest rate swaps convert floating-rate interest payments into fixed rate interest payments. We designated the interest rate swaps as qualifying hedging instruments and account for these derivatives as cash flow hedges. The outstanding interest rate swaps mature in 2023. We record gains and losses resulting from fair value adjustments to the designated portion of interest rate swaps in AOCI and reclassify them to Interest expense on the dates that interest payments accrue. Cash flows related to the interest rate swaps are included in Cash flows from operating activities of continuing operations on our Consolidated Statements of Cash Flows.

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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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