Derivative Financial Instruments

9 Months Ended

Sep. 30, 2024

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,
Currency	2024		2023
Colombian Peso	COP	53,976	COP	57,487
South Korean Won	KRW	22,671	KRW	—
Norwegian Krone	NOK	2,419	NOK	2,179
Japanese Yen	JPY	1,467	JPY	1,118
U.S. Dollar	USD	965	USD	677
Mexican Peso	MXN	349	MXN	157
Euro	EUR	119	EUR	102
Danish Krone	DKK	37	DKK	2
Singapore Dollar	SGD	27	SGD	23
South African Rand	ZAR	25	ZAR	25
British Pound Sterling	GBP	6	GBP	5
Canadian Dollar	CAD	1	CAD	1
Brazilian Real	BRL	—	BRL	291

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 accumulated other comprehensive income of $1 million 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 expense, net was $19 million and $29 million for the three and nine months ended September 30, 2024, respectively, and ($7) million and ($17) million for the three and nine months ended September 30, 2023, 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	2024		2023		Location	2024		2023

Derivatives designated as hedging instruments under ASC Topic 815
Foreign exchange contracts	Prepaid and other current assets	$	2	$	8	Accrued liabilities	$	1	$	2
Foreign exchange contracts	Other assets		—		—	Other liabilities		—		1
Total derivatives designated as hedging instruments under ASC Topic 815		$	2	$	8		$	1	$	3
Derivatives not designated as hedging instruments under ASC Topic 815
Foreign exchange contracts	Prepaid and other current assets	$	6	$	11	Accrued liabilities	$	4	$	17
Foreign exchange contracts	Other assets		—		—	Other liabilities		—		1
Total derivatives not designated as hedging instruments under ASC Topic 815		$	6	$	11		$	4	$	18
Total derivatives		$	8	$	19		$	5	$	21