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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
 9 Months Ended
Sep. 30, 2017
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

NOTE 7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company is exposed to global market risks, including risks from changes in FX rates and changes in interest rates. Accordingly, the Company uses derivatives in certain instances to manage the aforementioned financial exposures that occur in the normal course of business. The Company does not hold or issue derivatives for speculative purposes.

Derivatives and non-derivative instruments designated as accounting hedges:

Interest Rate Swaps

The Company has entered into interest rate swaps to convert the fixed interest rate on certain of its long-term debt to a floating interest rate based on the 3-month LIBOR. The purpose of these hedges is to mitigate the risk associated with changes in the fair value of the long-term debt, thus the Company has designated these swaps as fair value hedges. The fair value of the swaps is adjusted quarterly with a corresponding adjustment to the carrying value of the debt. The changes in the fair value of the swaps and the underlying hedged item generally offset and the net cash settlements on the swaps are recorded each period within interest (expense) income, net in the Company’s consolidated statement of operations.

The following table summarizes the Company’s interest rate swaps designated as fair value hedges:

Hedged ItemNature of SwapNotional AmountFloating Interest Rate
As of September 30, 2017As of December 31, 2016
2010 Senior Notes due 2020Pay Floating/Receive Fixed$500.0$500.03-month LIBOR
2014 Senior Notes due 2019Pay Floating/Receive Fixed$450.0$450.03-month LIBOR
2012 Senior Notes due 2022Pay Floating/Receive Fixed$80.0$80.03-month LIBOR

The following table summarizes the impact to the statement of operations of the Company’s interest rate swaps designated as fair value hedges:

Amount of income recognized in the consolidated statements of operations
Three Months EndedNine months ended
September 30,September 30,
Derivatives designated as fair value accounting hedgesLocation on Statement of Operations2017201620172016
Interest rate swaps Interest expense, net$1.6$2.7$5.8$8.8

Cross-currency swaps

In conjunction with the issuance of the 2015 Senior Notes, the Company entered into a cross-currency swap to exchange €100 million for U.S. dollars on the date of the settlement of the notes. The purpose of this cross-currency swap is to mitigate FX risk on the remaining principal balance on the 2015 Senior Notes that was not designated as a net investment hedge as more fully discussed below. Under the terms of the swap, the Company will pay the counterparty interest on the $110.5 million received at 3.945% per annum and the counterparty will pay the Company interest on the €100 million paid at 1.75% per annum. These interest payments will be settled in March of each year, beginning in 2016, until either the maturity of the cross-currency swap in 2027 or upon early termination at the discretion of the Company. The principal payments on this cross currency swap will be settled in 2027, concurrent with the repayment of the 2015 Senior Notes at maturity or upon early termination at the discretion of the Company. In March 2016, the Company designated these cross-currency swaps as cash flow hedges. Accordingly, changes in fair value subsequent to the date the swaps were designated as cash flow hedges will initially be recognized in OCI. Gains and losses on the swaps initially recognized in OCI will be reclassified to the statement of operations in the period in which changes in the underlying hedged item affects net income. Ineffectiveness, if any, will be recognized in other non-operating (expense) income, net in the Company’s consolidated statement of operations.

Forward start interest rate swaps

In the second quarter of 2017, in conjunction with the then-forecasted issuance of the Company’s 2017 Private Placement Notes Due 2023 and 2017 Private Placement Notes Due 2028, the Company entered into forward starting interest rate swaps to mitigate the risk of changes in the semi-annual interest payments attributable to changes in market interest rates during the period leading up to the forecasted debt issuance. The swaps were terminated on June 5, 2017 following the issuance of the aforementioned notes and the losses recorded to OCI upon settlement were not material.

Net investment hedges

The Company entered into foreign currency forward contracts that are designated as net investment hedges and additionally has designated €400 million of the 2015 Senior Notes Due 2027 as a net investment hedge. These hedges are intended to mitigate FX exposure related to non-U.S. dollar net investments in certain foreign subsidiaries against changes in foreign exchange rates. These net investment hedges are designated as accounting hedges under the applicable sections of Topic 815 of the ASC. This net investment hedge will end upon the repayment of the notes in 2027 unless terminated earlier at the discretion of the Company.

Hedge effectiveness is assessed based on the overall changes in the fair value of the hedge. For hedges that meet the effectiveness requirements, any change in the fair value is recorded in OCI in the foreign currency translation account. Any change in the fair value of these hedges that is the result of ineffectiveness is recognized immediately in other non-operating (expense) income, net in the Company’s consolidated statement of operations.

The following table summarizes the notional amounts of the Company’s outstanding forward contracts that were designated as net investment hedges:

September 30,December 31,
20172016
Notional amount of net investment hedges:SellBuySellBuy
Contracts to sell GBP for euros£-€-£22.1€26.4

The following table provides information on the gains/(losses) on the Company’s net investment and cash flow hedges:

Amount of Gain/(Loss) Recognized in AOCI on Derivative (Effective Portion)Amount of Gain/(Loss) Reclassified from AOCI into Income (Effective Portion)Amount of Gain/(Loss) Recognized Directly into Income (Ineffective Portion), net of Tax
Derivatives and non-derivative instruments in Net Investment Hedging RelationshipsThree Months EndedThree Months EndedThree Months Ended
September 30,September 30,September 30,
201720162017201620172016
FX forwards$0.4$(0.2)$-$-$-$-
Long-term debt(10.3)(3.2)----
Total net investment hedges$(9.9)$(3.4)$-$-$-$-
Derivatives in cash flow hedging relationships
Cross currency swap$3.2$3.2$2.6*$0.9*$-$-
Total cash flow hedges$3.2$3.2$2.6$0.9$-$-
Total $(6.7)$(0.2)$2.6$0.9$-$-
Amount of Gain/(Loss) Recognized in AOCI on Derivative (Effective Portion)Amount of Gain/(Loss) Reclassified from AOCI into Income (Effective Portion)Amount of Gain/(Loss) Recognized Directly into Income (Ineffective Portion), net of Tax
Derivatives and non-derivative instruments in Net Investment Hedging RelationshipsNine months endedNine months endedNine months ended
September 30,September 30,September 30,
201720162017201620172016
FX forwards$1.2$(13.4)$-$-$-$-
Long-term debt(31.4)(9.2)----
Total net investment hedges$(30.2)$(22.6)$-$-$-$-
Derivatives in cash flow hedging relationships
Cross currency swap$6.6$1.5$7.9*$0.6*$0.4**$-
Interest rate contracts(0.4)-(1.1)---
Total cash flow hedges$6.2$1.5$6.8$0.6$0.4$-
Total $(24.0)$(21.1)$6.8$0.6$0.4$-
*For the three and nine months ended September 30, 2017, reflects $4.2 million and $12.8 million in gains, respectively, recorded in other non-operating income (expense), net and $1.6 million and $4.9 million relating to the tax effect of the aforementioned item. For the three and nine months ended September 30, 2016, reflects $1.3 million and $0.9 million in losses, respectively, recorded in other non-operating income (expense), net and $0.4 million and $0.3 million relating to the tax effect of the aforementioned item.
**For the nine months ended September 30, 2017, reflects $0.7 million in gains recorded in other non-operating income (expense), net and $0.3 million relating to the tax effect of the aforementioned item.

The cumulative amount of realized and unrecognized net investment hedge and cash flow hedge gains (losses) recorded in AOCI is as follows:

Cumulative
Gains/(Losses), net of tax
September 30,December 31,
Net investment hedges20172016
FX forwards $23.5$22.3
Long-term debt (18.9)12.5
Total net gains on net investment hedges$4.6$34.8
Cash flow hedges
Interest rate contracts$(0.4)$(1.1)
Cross currency swap1.52.8
Total net gains on cash flow hedges1.11.7
Total net gains in AOCI$5.7$36.5

Derivatives not designated as accounting hedges:

Foreign exchange forwards

The Company also enters into foreign exchange forwards to mitigate the change in fair value on certain assets and liabilities denominated in currencies other than a subsidiary’s functional currency. These forward contracts are not designated as accounting hedges under the applicable sections of Topic 815 of the ASC. Accordingly, changes in the fair value of these contracts are recognized immediately in other non-operating (expense), income net in the Company’s consolidated statements of operations along with the FX gain or loss recognized on the assets and liabilities denominated in a currency other than the subsidiary’s functional currency. These contracts have expiration dates at various times through February 2018.

The following table summarizes the notional amounts of the Company’s outstanding foreign exchange forwards:

September 30,December 31,
20172016
Notional amount of currency pair:SellBuySellBuy
Contracts to sell USD for GBP$471.0£356.1$-£-
Contracts to sell USD for JPY$24.3¥2,700.0$-$-
Contracts to sell USD for CAD$51.9C$64.0$-C$-
Contracts to purchase euros with Singapore dollarsS$ - € - S$55.5€36.0
Contracts to sell euros for GBP€ - £ - €31.0£25.9
Contracts to sell USD for Singapore dollars$38.9S$53.0$-S$-
Contracts to sell euros for USD€6.0$7.2€-$-
Contracts to sell USD for EUR$54.3€45.0$-€-

Foreign Exchange Options and forward contracts relating to the acquisition of Bureau van Dijk

The Company entered into a foreign currency collar consisting of option contracts to economically hedge the Bureau van Dijk euro denominated purchase price (as discussed further in Note 7). These option contracts are not designated as accounting hedges under the applicable sections of Topic 815 of the ASC. The foreign currency option contracts consisted of separate put and call options each in the aggregate notional amount of €2.7 billion. This collar was settled at the end of July 2017, in advance of the August 10, 2017 closing of the Bureau van Dijk acquisition in connection with the Company’s funding mechanics to fund the euro denominated purchase price.

The Company entered into foreign exchange forwards to hedge the Bureau van Dijk purchase price for the period from the settlement of the aforementioned foreign currency collar until the closing date on August 10, 2017. These forward contracts were not designated as accounting hedges under the applicable sections of Topic 815 of the ASC. The foreign exchange contracts were to sell $2.8 billion and buy €2.4 billion and sell $41 million and buy £31 million.

The following table summarizes the impact to the consolidated statements of operations relating to the net gain (loss) on the Company’s derivatives which are not designated as hedging instruments:

Three Months EndedNine months ended
September 30,September 30,
Derivatives not designated as accounting hedgesLocation on Statement of Operations2017201620172016
Foreign exchange forwardsOther non-operating income (expense), net$9.2$(0.7)$14.0$(5.9)
Foreign exchange forwards relating to Bureau van Dijk acquisitionPurchase Price Hedge Gain10.3-10.3-
FX collar relating to Bureau van Dijk acquisitionPurchase Price Hedge Gain59.6-100.8-
$79.1$(0.7)$125.1$(5.9)

The table below shows the classification between assets and liabilities on the Company’s consolidated balance sheets for the fair value of the derivative instrument as well as the carrying value of its non-derivative debt instruments designated and qualifying as net investment hedges:

Derivative and Non-derivative Instruments
Balance Sheet LocationSeptember 30, 2017December 31, 2016
Assets:
Derivatives designated as accounting hedges:
FX forwards on net investment in certain foreign subsidiariesOther current assets$-$0.6
Cross-currency swapOther assets7.3-
Interest rate swapsOther assets5.07.0
Total derivatives designated as accounting hedges$12.3$7.6
Derivatives not designated as accounting hedges:
FX forwards on certain assets and liabilitiesOther current assets10.6-
Total assets$22.9$7.6
Liabilities:
Derivatives designated as accounting hedges:
Cross-currency swapOther liabilities$-$3.8
Interest rate swapsOther liabilities1.00.8
Total derivatives designated as accounting hedges1.04.6
Non-derivative instrument designated as accounting hedge:
Long-term debt designated as net investment hedgeLong-term debt472.9421.9
Derivatives not designated as accounting hedges:
FX forwards on certain assets and liabilitiesAccounts payable and accrued liabilities4.10.8
Total liabilities$478.0$427.3