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Fair Value Measurements | 3 Months Ended
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Mar. 31, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Fair Value Measurements | The fair value of our financial assets and liabilities is determined by reference to market data and other valuation techniques as appropriate. We believe the fair value of our financial instruments, which are principally cash and cash equivalents, restricted cash, receivables, other current assets, accounts payable and accrued liabilities, approximates their recorded values. Our assets and liabilities measured at fair value on a recurring basis are described below. Derivative Financial Instruments As of March 31, 2022, we held the following derivative instruments that were accounted for pursuant to ASC 815: Interest Rate Swap Contracts We used interest rate swap contracts as described below to mitigate gains or losses associated with the change in expected cash flows due to fluctuations in interest rates on our variable rate debt. In February 2018, we entered into interest rate swap contracts to hedge a portion of our interest expense associated with our variable rate debt to effectively fix the interest rate that we pay. These interest rate swap contracts were designated as cash flow hedges under ASC 815. We paid interest at a weighted-average fixed rate of 2.4418% and received interest at a variable rate equal to one-month LIBOR. The total notional amount of interest rate swaps was $800 million. These hedges matured in February 2022. In April 2022, we entered into the new interest rate swap contracts with $700 million notional amount to hedge a portion of our interest expense associated with our variable rate debt to effectively fix the interest rate that we will pay. All gains and losses from these hedges were recorded in Other comprehensive income (loss) until the future underlying payment transactions occur. Any realized gains or losses resulting from the hedges were recognized (together with the hedged transaction) as Interest expense. We estimated the fair value of our interest rate swap contracts by discounting the future cash flows of both the fixed rate and variable rate interest payments based on market yield curves. The inputs used to measure the fair value of our interest rate swap contracts were categorized as Level 2 in the fair value hierarchy as established by ASC 820. The following table shows the Gain (loss) and Interest expense recognized on our interest rate swap contracts:
| Three Months Ended March 31, |  |
| 2022 |  | 2021 |  |  |  |
Gain recorded in accumulated other comprehensive loss, net of tax | $ | 3 |  |  | $ | 5 |  |  |  |  |
Interest expense recorded related to interest rate swap contracts | 3 |  |  | 5 |  |  |  |  |
The following table shows the effect of interest rate swap contracts designated as cash flow hedges in the consolidated statements of operations:
| Three Months Ended March 31, |  |
| 2022 |  | 2021 |  |  |  |
| Interest expense |  |
Total interest expense which reflects the effects of cash flow hedges | $ | (116) |  |  | $ | (121) |  |  |  |  |
Hedged item | (3) |  |  | (5) |  |  |  |  |
Derivative designated as hedging instrument | — |  |  | — |  |  |  |  |
Cross-Currency Interest Rate Swaps We entered into certain cross-currency interest rate swap agreements to achieve more beneficial interest rates by effectively converting $460 million of our fixed-rate U.S. Dollar-denominated 2025 Secured Notes, including the semi-annual interest payments through October 2023, to fixed-rate Euro-denominated debt, with a fixed annual weighted average interest rate of approximately 2.946%. We have designated these cross-currency interest rate swap agreements as a net investment hedge of our investments in certain of our international subsidiaries that use the Euro as their functional currency in order to reduce the volatility in our operating results caused by the changes in foreign currency exchange rates of the Euro relative to the U.S. Dollar. We use the spot method to measure the effectiveness of our net investment hedge. Under this method, for each reporting period, the change in the fair value of the $460 million cross-currency interest rate swaps is reported in Foreign currency translation gain (loss) in Accumulated other comprehensive loss. The cross-currency basis spread (along with other components of the cross-currency swap’s fair value excluded from the spot method effectiveness assessment) are amortized and recorded to Interest expense. We evaluate the effectiveness of our net investment hedge at the beginning of each quarter. In April of 2022 and as a result of the April 2022 Refinancing, we settled our cross-currency interest rate swaps and received approximately $50 million in cash proceeds. The following table shows the fair value of our hedges:
|  |  | As of
| Balance Sheet Line Item |  | March 31, 2022 |  | December 31, 2021
Interest rate swaps(1) | Other liabilities |  | $ | — |  |  | $ | 3 |
Cross-currency interest rate swaps(1)(2) | Other assets |  | 46 |  |  | 42 |
(1) The inputs used to measure the fair value of our interest rate swap contracts were categorized as Level 2 in the fair value hierarchy.
(2) A gain of $4 million for the three months ended March 31, 2022 is reflected in Foreign currency translation gain (loss) in Other comprehensive gain (loss).
Net Investment Non-derivative Hedge — 2026 Secured Euro Notes For the first quarter of 2022, we designated $208 million of our 2026 Secured Euro Notes as a net investment non-derivative hedge of our investments in certain of our international subsidiaries that use the Euro as their functional currency in order to reduce the volatility in our results caused by the changes in foreign currency exchange rates of the Euro relative to the U.S. Dollar. We use the spot method to measure the effectiveness of our net investment non-derivative hedge. Under this method, for each reporting period, the change in the hedged portion of the carrying value of the 2026 Secured Euro Notes due to remeasurement is reported in Foreign currency translation gain (loss) in Other comprehensive loss, and the remaining remeasurement change is recognized in (Loss) gain on remeasurement of debt in our consolidated statements of operations. We evaluate the effectiveness of our net investment non-derivative hedge at the beginning of each quarter, and the inputs used to measure the fair value of this non-derivative hedge are categorized as Level 2 in the fair value hierarchy. Contingent Acquisition Consideration Liabilities In connection with our acquisitions, we have recorded certain contingent consideration liabilities (including the redeemable non-controlling interest related to Alictus), of which the values are primarily based on reaching certain earnings-based metrics. The related liabilities were recorded at fair value on their respective acquisition dates as a part of the consideration transferred and are remeasured each reporting period (other than for the redeemable non-controlling interest, which is remeasured based on its redemption value). The inputs used to measure the fair value of our liabilities are categorized as Level 3 in the fair value hierarchy. Contingent acquisition consideration liabilities (including deferred purchase price and redeemable non-controlling interest for Alictus) as of March 31, 2022, are $72 million, of which $19 million is included in Accrued liabilities with the remainder included in Other long-term liabilities, with the increase primarily related to the Alictus acquisition described in Note 1. Contingent acquisition consideration liabilities as of December 31, 2021, were $51 million, of which $3 million was included in Accrued liabilities with the remaining balance included in Other long-term liabilities.

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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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