Derivative Financial Instruments

9 Months Ended

Sep. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

12.

Derivative Financial Instruments

The Company uses forward currency contracts to manage the foreign currency exchange rate risk on forecasted revenues and expenses denominated in currencies other than the functional currency of the operating unit (cash flow hedge). The Company also executes forward currency contracts to manage the foreign currency exchange rate risk on recognized nonfunctional currency monetary accounts (non-designated hedge).

The fair values of these derivative financial instruments are determined using level 2 inputs (inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability) in the fair value hierarchy as the fair value is based on publicly available foreign exchange and interest rates at each financial reporting date.

Forward currency contracts consist of (in millions):


	Currency Denomination
	September 30,		December 31,
Foreign Currency	2023		2022
Colombian Peso	COP	58,566	COP	—
South Korean Won	KRW	6,782	KRW	65,980
Norwegian Krone	NOK	2,612	NOK	2,741
U.S. Dollar	USD	713	USD	655
Japanese Yen	JPY	455	JPY	460
Brazilian Real	BRL	291	BRL	291
Mexican Peso	MXN	175	MXN	160
Euro	EUR	125	EUR	125
Singapore Dollar	SGD	26	SGD	27
South African Rand	ZAR	25	ZAR	149
British Pound Sterling	GBP	15	GBP	16
Danish Krone	DKK	10	DKK	13

Cash Flow Hedging Strategy

To protect against the volatility of forecasted foreign currency cash flows resulting from forecasted revenues and expenses, the Company 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 $12 million of the accumulated other comprehensive 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 earnings 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 ($7) million and ($17) million for the three and nine months ended September 30, 2023, respectively, and ($8) million and ($22) million for the three and nine months ended September 30, 2022, 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	September 30,		December 31,		Balance Sheet	September 30,		December 31,
	Location	2023		2022		Location	2023		2022

Derivatives designated as hedging instruments under ASC Topic 815
Foreign exchange contracts	Prepaid and other current assets	$	1	$	3	Accrued liabilities	$	10	$	3
Foreign exchange contracts	Other Assets		—		—	Other liabilities		1		1
Total derivatives designated as hedging instruments under ASC Topic 815		$	1	$	3		$	11	$	4
Derivatives not designated as hedging instruments under ASC Topic 815
Foreign exchange contracts	Prepaid and other current assets	$	2	$	5	Accrued liabilities	$	16	$	10
Foreign exchange contracts	Other Assets		—		—	Other Liabilities		—		—
Total derivatives not designated as hedging instruments under ASC Topic 815		$	2	$	5		$	16	$	10
Total derivatives		$	3	$	8		$	27	$	14