Derivative Financial Instruments

3 Months Ended

Mar. 31, 2020

Derivative Instruments And Hedging Activities Disclosure [Abstract]

11.	Derivative Financial Instruments

The Company is exposed to certain risks relating to its ongoing business operations. The primary risk managed by using derivative instruments is the foreign currency exchange rate risk associated with sourcing goods and services in a currency different than the

currency of sale. Forward currency contracts are executed to manage the foreign exchange risk on forecasted revenues and expenses denominated in currencies other than the functional currency of the operating unit (cash flow hedge). In addition, the Company executes forward currency contracts to manage the foreign currency risk on recognized nonfunctional currency monetary accounts (non-designated hedge).

The Company had the following outstanding foreign currency forward contracts at March 31, 2020 (in millions):

	Currency Denomination
	March 31,		December 31,
Foreign Currency	2020		2019
South Korean Won	KRW	17,600	KRW	17,600
Norwegian Krone	NOK	5,232	NOK	5,377
Russian Ruble	RUB	1,274	RUB	1,012
U.S. Dollar	USD	536	USD	686
Mexican Peso	MXN	458	MXN	115
Euro	EUR	207	EUR	188
Japanese Yen	JPY	191	JPY	36
South African Rand	ZAR	124	ZAR	124
British Pound Sterling	GBP	38	GBP	20
Danish Krone	DKK	25	DKK	21
Singapore Dollar	SGD	18	SGD	42
Canadian Dollar	CAD	1	CAD	3

Cash Flow Hedging Strategy

To protect against the volatility of forecasted foreign currency cash flows resulting from forecasted revenues and expenses, the Company has instituted a cash flow hedging program. For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on the derivative instrument is recorded in accumulated other comprehensive income (loss) and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings (e.g., in “revenues” when the hedged transactions are cash flows associated with forecasted revenues). The Company includes time value in hedge relationships.

The Company expects $41 million of the accumulated other comprehensive income (loss) will be reclassified into earnings within the next twelve months.

Non-designated Hedging Strategy

The Company enters into forward exchange contracts to hedge certain nonfunctional currency monetary accounts. The gain or loss on the derivative instrument is recognized in other income (expense), together with the changes in the hedged nonfunctional monetary accounts.

The amount of gain (loss) recognized in other income (expense), net was ($43) million and $4 million for the three months ended March 31, 2020 and 2019, respectively.

The Company has the following fair values of its derivative instruments and their balance sheet classifications (in millions):

	Asset Derivatives					Liability Derivatives
		Fair Value					Fair Value
	Balance Sheet	March 31,		December 31,		Balance Sheet	March 31,		December 31,
	Location	2020		2019		Location	2020		2019
Derivatives designated as hedging instruments under ASC Topic 815

Foreign exchange contracts	Prepaid and other current assets	$	7	$	5	Accrued liabilities	$	65	$	18
Foreign exchange contracts	Other Assets		3		4	Other liabilities		21		2

Total derivatives designated as hedging instruments under ASC Topic 815		$	10	$	9		$	86	$	20

Derivatives not designated as hedging instruments under ASC Topic 815

Foreign exchange contracts	Prepaid and other current assets	$	15	$	8	Accrued liabilities	$	32	$	6
Foreign exchange contracts	Other Assets		2		1	Other Liabilities		—		—

Total derivatives not designated as hedging instruments under ASC Topic 815		$	17	$	9		$	32	$	6

Total derivatives		$	27	$	18		$	118	$	26