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Financial Instruments | 9 Months Ended
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Sep. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Financial Instruments | Financial Instruments Derivative Instruments and Hedging Activities Currency Risk. We use currency exchange contracts to manage our exposure to changes in currency exchange rates associated with certain of our non-U.S.-dollar denominated receivables and forecasted royalties, forecasted earnings of non-U.S. subsidiaries and forecasted non-U.S.-dollar denominated acquisitions. We primarily hedge a portion of our current-year currency exposure to the Australian, Canadian and New Zealand dollars, the euro and the British pound sterling. The majority of forward contracts do not qualify for hedge accounting treatment. The fluctuations in the value of these forward contracts do, however, largely offset the impact of changes in the value of the underlying risk they economically hedge. Forward contracts used to hedge forecasted third-party receipts and disbursements up to 12 months are designated and do qualify as cash flow hedges. We have designated our euro-denominated notes as a hedge of our investment in euro-denominated foreign operations. The estimated net amount of existing gains or losses we expect to reclassify from accumulated other comprehensive income (loss) to earnings for cash flow and net investment hedges over the next 12 months is not material. Interest Rate Risk. We use various hedging strategies including interest rate swaps and interest rate caps to create what we deem an appropriate mix of fixed and floating rate assets and liabilities. We use interest rate swaps and interest rate caps to manage the risk related to our floating rate corporate debt and our floating rate vehicle-backed debt. We record the changes in the fair value of our cash flow hedges to other comprehensive income (loss), net of tax, and subsequently reclassify these amounts into earnings in the period during which the hedged transaction affects earnings and is presented in the same income statement line item as the earnings effect of the hedged item. We record the gains or losses related to freestanding derivatives, which are not designated as a hedge for accounting purposes, currently in earnings and are presented in the same line of the income statement expected for the hedged item. We estimate that approximately $9 million of gains curr ently recorded in accumulated other comprehensive income (loss) will be recognized in earnings over the next 12 months. Commodity Risk. We periodically enter into derivative commodity contracts to manage our exposure to chan ges in the price of gasoline. These instruments were designated as freestanding derivatives and the changes in fair value are recorded in earnings and are presented in the same line of the income statement expected for the hedged item. We held derivative instruments with absolute notional values as follows:
| As of September 30, 2022
Foreign exchange contracts | $ | 1,470 |
Interest rate caps (a) | 13,960 |
Interest rate swaps | 1,450 |
__________ (a)Repres ents $9.9 billion of interest rate caps sold, partially offset by approximately $4.1 billion of interest rate caps purchased. These amounts exclude $6.2 billion of interest rate caps purchased by our Avis Budget Rental Car Funding subsidiary as it is not consolidated by us. Estimated fair values (Level 2) of derivative instruments were as follows:
|  | As of September 30, 2022 |  | As of December 31, 2021
|  | Fair Value, Derivative Assets |  | Fair Value, Derivative Liabilities |  | Fair Value, Derivative Assets |  | Fair Value, Derivative Liabilities
Derivatives designated as hedging instruments |  |  |  |  |  |  |
| Interest rate swaps (a) | $ | 62 |  |  | $ | — |  |  | $ | 2 |  |  | $ | 27 |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |
| Foreign exchange contracts (b) | 38 |  |  | 12 |  |  | 7 |  |  | 10 |
| Interest rate caps (c) | 54 |  |  | 164 |  |  | 11 |  |  | 15 |
| Total | $ | 154 |  |  | $ | 176 |  |  | $ | 20 |  |  | $ | 52 |
__________ Amounts in this table exclude derivatives issued by Avis Budget Rental Car Funding, as it is not consolidated by us; however, certain amounts related to the deriv atives held by Avis Budget Rental Car Funding are included within accumulated other comprehensive income (loss), as discussed in Note 13 – Stockholders' Equity. (a)Included in other non-current assets or other non-current liabilities. (b)Included in other current assets or other current liabilities. (c)Included in assets under vehicle programs or liabilities under vehicle programs. The effects of derivatives recognized in our Consolidated Condensed Financial Statements were as follows:
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2022 |  | 2021 |  | 2022 |  | 2021
Derivatives designated as hedging instruments (a) |  |  |  |  |  |  |
| Interest rate swaps (b) | $ | 22 |  |  | $ | 6 |  |  | $ | 65 |  |  | $ | 27 |
| Euro-denominated notes (c) | 46 |  |  | 19 |  |  | 104 |  |  | 42 |
Derivatives not designated as hedging instruments (d) |  |  |  |  |  |  |
| Foreign exchange contracts (e) | 27 |  |  | 6 |  |  | 70 |  |  | 1 |
| Interest rate caps (f) | 2 |  |  | (1) |  |  | 1 |  |  | (3) |
| Total | $ | 97 |  |  | $ | 30 |  |  | $ | 240 |  |  | $ | 67 |
__________ (a)Recognized, net of tax, as a component of other comprehensive income (loss) within stockholders’ equity. (b)Classified as a net unrealized gain (loss) on cash flow hedges in accumulated other comprehensive income (loss). Refer to Note 13 – Stockholders' Equity for amounts reclassified from accumulated other comprehensive income into earnings. (c)Classified as a net investment hedge within currency translation adjustment in accumulated other comprehensive income (loss). (d)Gains (losses) related to derivative instruments are expected to be largely offset by (losses) gains on the underlying exposures being hedged. (e)For the three months ended September 30, 2022, included a $25 million gai n in interest expense and a $2 million gain in operating expense and for the nine months ended September 30, 2022, included a $65 million gain in interest expense and a $5 million gain in operating expense. For the three months ended September 30, 2021, included a $7 million gain in interest expense and a $1 million loss in operating expense and for the nine months ended September 30, 2021, included a $2 million gain in interest expense and a $1 million loss in operating expense. (f)Included primarily in vehicle interest, net. Debt Instruments The carrying amounts and estimated fair values (Level 2) of debt instruments were as follows:
|  | As of September 30, 2022 |  | As of December 31, 2021
|  | Carrying Amount |  | Estimated Fair Value |  | Carrying Amount |  | Estimated Fair Value
Corporate debt |  |  |  |  |  |  |
| Short-term debt and current portion of long-term debt | $ | 27 |  |  | $ | 26 |  |  | $ | 19 |  |  | $ | 18 |
| Long-term debt | 4,563 |  |  | 4,224 |  |  | 3,990 |  |  | 4,153 |
Debt under vehicle programs |  |  |  |  |  |  |
| Vehicle-backed debt due to Avis Budget Rental Car Funding | $ | 10,422 |  |  | $ | 9,948 |  |  | $ | 8,848 |  |  | $ | 9,009 |
| Vehicle-backed debt | 2,518 |  |  | 2,517 |  |  | 2,528 |  |  | 2,559 |
| Interest rate swaps and interest rate caps (a) | 164 |  |  | 164 |  |  | 14 |  |  | 14 |
__________ (a) Derivatives in a liability position.

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- Definition The entire disclosure for financial instruments. This disclosure includes, but is not limited to, fair value measurements of short and long term marketable securities, international currencies forward contracts, and auction rate securities. Financial instruments may include hedging and non-hedging currency exchange instruments, derivatives, securitizations and securities available for sale at fair value. Also included are investment results, realized and unrealized gains and losses as well as impairments and risk management disclosures. + References No definition available. + Details
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