FAIR VALUE MEASUREMENT

12 Months Ended

Dec. 31, 2021

The estimated fair value and carrying value of the Company's total long-term debt, including current portion, was $2,239 million and $2,095 million, respectively, at December 31, 2021. At December 31, 2020, the estimated the fair value and carrying value was $2,509 million and $2,281 million, respectively. The fair value of long-term debt is based on recent trade information in the financial markets of the Company’s public debt or is determined by discounting future cash flows using interest rates available at December 31, 2021 to companies with similar credit ratings for issues with similar terms and maturities. It is considered a Level 2 fair value measurement for disclosure purposes.

The interest rate on the outstanding principal of the $750 million Senior Notes is a fixed rate of 3.3%. The fair value of the Senior Notes is based on interest rates at December 31, 2021. For additional details on interest rates of long-term debt, please see Note 15, Financing Arrangements.

Assets and liabilities measured at fair value on a recurring basis

The Company’s financial assets and liabilities set forth by level within the fair value hierarchy that were accounted for at fair value on a recurring basis were as follows:


	Year Ended December 31, 2021
(in millions)	Total		Level 1		Level 2		Level 3

Assets

Interest rate swaps	$	5	$	—	$	5	$	—
Long-term debt	4		—		4		—
Cross currency interest rate swaps	4		—		4		—
Foreign exchange forward contracts	30		—		30		—

Total assets	$	43	$	—	$	43	$	—

Liabilities
Interest rate swaps	$	9	$	—	$	9	$	—

Cross currency basis swaps	7		—		7		—
Foreign exchange forward contracts	4		—		4		—

Contingent considerations on acquisitions	10		—		—		10

Total liabilities	$	30	$	—	$	20	$	10


	Year Ended December 31, 2020
(in millions)	Total		Level 1		Level 2		Level 3

Assets




Foreign exchange forward contracts	$	10	$	—	$	10	$	—


Total assets	$	10	$	—	$	10	$	—

Liabilities


Cross currency interest rate swaps	$	20	$	—	$	20	$	—
Foreign exchange forward contracts	15		—		15		—

Contingent considerations on acquisitions	5		—		—		5

Total liabilities	$	40	$	—	$	35	$	5

Derivative valuations are based on observable inputs to the valuation model including interest rates, foreign currency exchange rates, and credit risks. The Company utilizes interest rates swaps and foreign exchange forward contracts that are considered cash flow hedges. In addition, the Company at times employs certain cross currency interest rate swaps and forward exchange contracts that are considered hedges of net investment in foreign operations. Both types of designated derivative instruments are further discussed in Note 20, Financial Instruments and Derivatives.

Assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (level 3)

The Company’s Level 3 liabilities at December 31, 2021 are related to earn-out obligations from acquisitions and licensing arrangements. The following table presents a reconciliation of the Company’s Level 3 holdings measured at fair value on a recurring basis using unobservable inputs:



(in millions)	Level 3

Balance, December 31, 2019	$	9
Issuance of new contingent consideration	—
Loss (gain) in Other expense (income), net	—
Payments	(4)

Balance, December 31, 2020	$	5
Issuance of contingent consideration from business acquisition (a)	9
Loss (gain) in Other expense (income), net	—
Payments	(4)

Balance, December 31, 2021	$	10

(a) Refer to Note 6, "Business Combinations" for more information regarding recent acquisitions

There were no additional purchases or transfers of Level 3 financial instruments in 2021 and 2020.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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