Derivative instruments and hedging activities (Tables)

9 Months Ended

Sep. 30, 2021

Summary of Classification and Fair Values of Derivative Instruments

The following table summarizes the classification and fair values of derivative instruments:


	Fair value
	Not designated as hedging instruments
	September 30, 2021			December 31, 2020

Reported under	(U.S. $ in millions)
Asset derivatives:
Other current assets:
Option and forward contracts	$	45		$	24
Liability derivatives:
Other current liabilities:
Option and forward contracts		(23	)		(79	)

Derivatives Not Designated as Hedging Instruments

The table below provides information regarding the location and amount of

pre-tax

(gains) losses from derivatives designated in fair value or cash flow hedging relationships:


		Financial expenses, net				Other comprehensive income (loss)

	Three months ended,				Three months ended,
	September 30, 2021		September 30, 2020		September 30, 2021			September 30, 2020

Reported under		(U.S. $ in millions)

Line items in which effects of hedges are recorded	$	241	$	117	$	(187	)	$	79
Cross-currency swaps—net investment hedge (1)		—		—		—			—


	Financial expenses, net					Other comprehensive income (loss)
		Nine months ended,					Nine months ended,

	September 30, 2021		September 30, 2020			September 30, 2021			September 30, 2020

Reported under	(U.S. $ in millions)
Line items in which effects of hedges are recorded	$	805	$	565		$	(302	)	$	(302	)
Cross-currency swaps—net investment hedge (1)		—		(2	)		—			(21	)

Information Regarding The Location And Amount Of Pretax (Gains) Losses Of Derivatives Designated In Fair Value Or Cash Flow Hedging Relationships

The table below provides information regarding the loc

tion and amount of

pre-tax

(gains) losses from derivatives not designated as hedging instruments:


		Financial expenses, net					Net revenues

		Three months ended,					Three months ended,

	September 30, 2021			September 30, 2020		September 30, 2021			September 30, 2020

Reported under	(U.S. $ in millions)
Line items in which effects of hedges are recorded	$	241		$	117	$	(3,887	)	$	(3,978	)
Option and forward contracts (2)		(9	)		40		—			—
Option and forward contracts economic hedge (3)		—			—		(16	)		3


	Financial expenses, net					Net revenues
	Nine months ended,					Nine months ended,
	September 30, 2021			September 30, 2020		September 30, 2021			September 30, 2020
Reported under	(U.S. $ in millions)
Line items in which effects of hedges are recorded	$	805		$	565	$	(11,778	)	$	(12,206	)
Option and forward contracts (2)		(51	)		78		—			—
Option and forward contracts economic hedge (3)		—			—		(29	)		(37	)

(1)

In each of the first and second quarters of 2017, Teva entered into a cross currency swap agreement with a notional amount of $500 million maturing in 2020. These cross currency swaps were designated as a net investment hedge of Teva’s foreign subsidiaries euro denominated net assets, in order to reduce the risk of adverse exchange rate fluctuations. With respect to these cross currency swap agreements, Teva recognized gains which mainly reflect the differences between the

float-for-float

interest rates paid and received. In the first quarter of 2020, these cross-currency swap agreements expired. The settlement of these transactions resulted in cash proceeds of $3 million.

(2)

Teva uses foreign exchange contracts (mainly option and forward contracts) to hedge balance sheet items from currency exposure. These foreign exchange contracts are not designated as hedging instruments for accounting purposes. In connection with these foreign exchange contracts, Teva recognizes gains or losses that offset the revaluation of the balance sheet items also recorded under financial expenses, net.

(3)

Teva entered into option and forward contracts designed to limit the exposure of foreign exchange fluctuations on projected revenues and expenses recorded in euro, the Swiss franc, the Japanese yen, the British pound, the Russian ruble, the Canadian dollar and some other currencies to protect its projected operating results for 2021 and 2022. These derivative instruments do not meet the criteria for hedge accounting, however, they are accounted for as an economic hedge. These derivative instruments, which may include hedging transactions against future projected revenues and expenses, are recognized on the balance sheet at their fair value on a quarterly basis, while the foreign exchange impact on the underlying revenues and expenses may occur in subsequent quarters. In 2020, Teva recognized a loss of $27 million in relation with the 2021 hedging program Teva entered into in the second half of 2020. In the first nine months of 2021, the positive impact from these derivatives recognized under revenues was $29 million, of which $6 million relate to 2022 operating results. Changes in the fair value of the derivative instruments are recognized in the same line item in the statements of income as the underlying exposure being hedged. The cash flows associated with these derivatives are reflected as cash flows from operating activities in the consolidated statements of cash flows.