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Derivative Instruments and Hedging Activities | 12 Months Ended
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Dec. 31, 2023
Derivative Instruments and Hedging Activities |
Derivative Instruments and Hedging Activities | (13) Derivative Instruments and Hedging Activities The Company is exposed to foreign currency exchange risk resulting from (i) the collection of funds or the settlement of money transfer transactions in currencies other than the U.S. dollar, (ii) derivative contracts written to its customers in connection with providing cross-currency money transfer services and (iii) certain foreign currency denominated other asset and liability positions. The Company enters into foreign currency derivative contracts, primarily foreign currency forwards and cross-currency swaps, to minimize its exposure related to fluctuations in foreign currency exchange rates. As a matter of Company policy, the derivative instruments used in these activities are economic hedges and are not designated as hedges under ASC 815, primarily due to either the relatively short duration of the contract term or the effects of fluctuations in currency exchange rates being reflected concurrently in earnings for both the derivative instrument and the transaction and have an offsetting effect. Foreign currency exchange contracts - Ria Operations and Corporate In the United States, the Company uses short-duration foreign currency forward contracts, generally with maturities up to 14 days, to offset the fluctuation in foreign currency exchange rates on the collection of money transfer funds between initiation of a transaction and its settlement. Due to the short duration of these contracts and the Company's credit profile, the Company is generally not required to post collateral with respect to these foreign currency forward contracts. Most derivative contracts executed with counterparties in the U.S. are governed by an International Swaps and Derivatives Association agreement that includes standard netting arrangements; therefore, asset and liability positions from forward contracts and all other foreign exchange transactions with the same counterparty are net settled upon maturity. As of December 31, 2023 and 2022, the Company had foreign currency forward contracts outstanding in the U.S. with a notional value of $393.3 million and $398.6 million, respectively. The foreign currency forward contracts consist primarily in Australian dollars, Canadian dollars, British pounds, euros and Mexican pesos. In addition, the Company uses forward contracts, typically with maturities from a few days to less than one year, to offset foreign exchange rate fluctuations on certain short-term borrowings that are payable in currencies other than the U.S dollar. As of December 31, 2023 and 2022, the Company had foreign currency forward contracts outstanding with a notional value of $563.1 million and $228.4 million, respectively, primarily in euros. Foreign currency exchange contracts - xe Operations xe, writes derivative instruments, primarily foreign currency forward contracts and cross-currency swaps, mostly with counterparties comprised of individuals and small-to-medium size businesses and derives a currency margin from this activity as part of its operations. xe aggregates its foreign currency exposures arising from customer contracts and hedges the resulting net currency risks by entering into offsetting contracts with established financial institution counterparties. Foreign exchange revenues from xe's total portfolio of positions were $85.3 million, $86.6 million, and $79.5 million for the years ended December 31, 2023, 2022 and 2021, respectively. All of the derivative contracts used in the Company's xe operations are economic hedges and are not designated as hedges under ASC 815. The duration of these derivative contracts is generally less than one year. The fair value of xe's total portfolio of positions can change significantly from period to period based on, among other factors, market movements and changes in customer contract positions. xe manages counterparty credit risk (the risk that counterparties will default and not make payments according to the terms of the agreements) on an individual counterparty basis. It mitigates this risk by entering into contracts with collateral posting requirements and/or by performing financial assessments prior to contract execution, conducting periodic evaluations of counterparty performance and maintaining a diverse portfolio of qualified counterparties. xe does not expect any significant losses from counterparty defaults. The aggregate equivalent U.S. dollar notional amounts of foreign currency derivative customer contracts held by the Company in its xe operations as of December 31, 2023 and 2022, was respectively $1.1 billion and $1.0 billion. The significant majority of customer contracts are written in major currencies such as the euro, U.S. dollar, British pound, Australian dollar and New Zealand dollar. The following table summarizes the fair value of the derivative instruments as recorded in the Consolidated Balance Sheets as of the dates below:
|  | Asset Derivatives |  | Liability Derivatives
|  |  |  | Fair Value |  |  |  | Fair Value
(in millions) |  | Balance Sheet Location |  | December 31, 2023 |  | December 31, 2022 |  | Balance Sheet Location |  | December 31, 2023 |  | December 31, 2022
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency exchange contracts |  | Other current assets |  | $ | 50.0 |  |  | $ | 50.3 |  |  | Other current liabilities |  | $ | (39.1 | ) |  | $ | (42.3 | )
Balance Sheet Presentation The following tables summarize the gross and net fair value of derivative assets and liabilities as of December 31, 2023 and 2022 (in millions): Offsetting of Derivative Assets
As of December 31, 2023 |  | Gross Amounts of Recognized Assets |  | Gross Amounts Offset in the Consolidated Balance Sheet |  | Net Amounts Presented in the Consolidated Balance Sheet |  | Derivatives Not Offset in the Consolidated Balance Sheet |  |  | Net Amounts
Derivatives subject to a master netting arrangement or similar agreement |  | $ | 50.0 |  |  | $ | — |  |  | $ | 50.0 |  |  | $ | (19.9 | ) |  |  | $ | 30.1 |
As of December 31, 2022 |  |  |  |  |  |  |  |  |  |  |
Derivatives subject to a master netting arrangement or similar agreement |  | $ | 50.3 |  |  | $ | — |  |  | $ | 50.3 |  |  | $ | (32.0 | ) |  |  | $ | 18.3 |
Offsetting of Derivative Liabilities
As of December 31, 2023 |  | Gross Amounts of Recognized Liabilities |  | Gross Amounts Offset in the Consolidated Balance Sheet |  | Net Amounts Presented in the Consolidated Balance Sheet |  | Derivatives Not Offset in the Consolidated Balance Sheet |  |  | Net Amounts
Derivatives subject to a master netting arrangement or similar agreement |  | $ | (39.1 | ) |  | $ | — |  |  | $ | (39.1 | ) |  | $ | 26.3 |  |  |  | $ | (12.8 | )
As of December 31, 2022 |  |  |  |  |  |  |  |  |  |  |
Derivatives subject to a master netting arrangement or similar agreement |  | $ | (42.3 | ) |  | $ | — |  |  | $ | (42.3 | ) |  | $ | 32.1 |  |  |  | $ | (10.2 | )
Income Statement Presentation The following tables summarize the location and amount of gains on derivatives in the Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021:
|  |  |  | Amount of Gain (Loss) Recognized in Income on Derivative Contracts (a)
|  | Location of Gain (Loss) Recognized in Income on Derivative Contracts |  | Year Ended December 31,
(in millions) |  |  | 2023 |  | 2022 |  | 2021
Foreign currency exchange contracts - Ria Operations |  | Foreign currency exchange gain (loss), net |  | $ | (1.7 | ) |  | $ | (0.3 | ) |  | $ | 1.6 |
(a) The Company enters into derivative contracts such as foreign currency exchange forwards and cross-currency swaps as part of its xe operations. These derivative contracts are excluded from this table as they are part of the broader disclosure of foreign currency exchange revenues for this business discussed above. See Note 19, Financial Instruments and Fair Value Measurements, for the determination of the fair values of derivatives.

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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://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
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