Fair Value of Financial Assets and Liabilities

9 Months Ended

Sep. 30, 2022

Fair Value of Financial Assets and Liabilities

The following table represents assets and liabilities measured at fair value on a recurring basis. The basis for the measurement at fair value in all cases is Level 2 – Significant Other Observable Inputs.


	September 30, 2022		December 31, 2021
Assets
Foreign exchange contracts - forwards	$	11	$	4

Interest rate cap	5		1
Interest rate swap	1		—

Deferred compensation plan investments in mutual funds	15		18
Total	$	32	$	23
Liabilities
Foreign exchange contracts - forwards	$	35	$	11



Deferred compensation plan liabilities	14		18
Total	$	49	$	29

We utilize the income approach to measure the fair value for our derivative assets and liabilities. The income approach uses pricing models that rely on market observable inputs such as yield curves, currency exchange rates and forward prices, and therefore are classified as Level 2.

Fair value for our deferred compensation plan investments in mutual funds is based on quoted market prices for those funds. Fair value for deferred compensation plan liabilities is based on the fair value of investments corresponding to employees’ investment selections.

Summary of Other Financial Assets and Liabilities

The estimated fair values of our other financial assets and liabilities were as follows:


	September 30, 2022				December 31, 2021
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Cash and cash equivalents	$	932	$	932	$	1,840	$	1,840
Accounts receivable, net	835		835		818		818
Short-term debt and current portion of long-term debt	1,070		1,066		650		653
Long-term Debt
Xerox Holdings Corporation	1,496		1,280		1,494		1,579
Xerox Corporation	894		730		1,892		1,987
Xerox - Other Subsidiaries(1)	286		286		210		210
Long-term debt	$	2,676	$	2,296	$	3,596	$	3,776

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(1)Represents subsidiaries of Xerox Corporation

The fair value amounts for Cash and cash equivalents and Accounts receivable, net, approximate carrying amounts due to the short maturities of these instruments. The fair value of Short-term debt, including the current portion of long-term debt, and Long-term debt was estimated based on the current rates offered to us for debt of similar maturities (Level 2). The difference between the fair value and the carrying value represents the theoretical net premium or discount we would pay or receive to retire all debt at such date.

- 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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