Derivative Contracts |
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Jun. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Contracts | Derivative Contracts Derivatives Designated as Hedging Instruments We entered into forward contracts to hedge a portion of our forecasted foreign currency denominated revenues during the three and six months ended June 30, 2024. These forward contracts are recorded at fair value and have maturities of up to 34 months. As of June 30, 2024, we had outstanding cash flow hedges with total notional values of $1.6 billion. We classify cash flows related to our cash flow hedges as operating activities in our condensed consolidated statements of cash flows. The total gross fair values of derivatives designated as hedging instruments recorded within the condensed consolidated balance sheets were as follows (in millions):
As of June 30, 2024, we had net derivative gains on our forward contracts of $28 million in accumulated other comprehensive income (loss), of which approximately $19 million is expected to be recognized in within the next 12 months. To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge and the hedges must be highly effective in offsetting changes to future cash flows on hedged transactions. We evaluate hedge effectiveness at the inception of the hedge prospectively, and on an ongoing basis both retrospectively and prospectively. We report changes in fair value of these cash flow hedges as a component of accumulated other comprehensive income (loss) and subsequently reclassify into earnings in the same period the forecasted transaction affects earnings. Amounts reclassified to subscription revenues totaled $5 million for the three and six months ended June 30, 2024. There was no ineffectiveness in the Company’s cash flow hedging program for the three and six months ended June 30, 2024. Derivatives not Designated as Hedging Instruments Our derivatives not designated as hedging instruments consist of foreign currency forward contracts that we primarily use to hedge monetary assets and liabilities denominated in non-functional currencies. These foreign currency forward contracts are recorded at fair value and have maturities of 12 months or less. The changes in the fair value of these contracts are recorded in other expense, net on the condensed consolidated statements of comprehensive income. As of June 30, 2024 and December 31, 2023, we had foreign currency forward contracts with total notional values of $2.2 billion and $1.7 billion, respectively, which were not designated as hedging instruments. The gross fair value of these foreign currency forward contracts was immaterial as of June 30, 2024 and December 31, 2023. The gains (losses) recognized for these foreign currency forward contracts from derivatives not designated as hedging instruments were immaterial for each of the three and six months ended June 30, 2024 and 2023. All of our foreign currency forward contracts, both designated and not designated as hedging instruments, are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments in active markets, such as currency spot and forward rates.
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