Derivatives and Hedging

3 Months Ended

Mar. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging

Derivatives and Hedging

The Company is exposed to market risks, including changes in foreign currency exchange rates and interest rates. To manage the risk related to these exposures, the Company enters into various derivative instruments that reduce these risks by creating offsetting exposures. The Company does not enter into derivative transactions for trading or speculative purposes.

Foreign Exchange Risk Management

The Company is exposed to foreign exchange risk when it earns revenues, pays expenses, enters into monetary intercompany transfers or other transactions denominated in a currency that differs from its functional currency. The Company uses foreign exchange derivatives, typically forward contracts, options and cross currency swaps, to reduce its overall exposure to the effects of currency fluctuations on cash flows. These exposures are hedged, on average, for less than two years. These derivatives are accounted for as hedges, and changes in fair value are recorded each period in Other comprehensive income (loss) in the Condensed Consolidated Statements of Comprehensive Income.

The Company also uses foreign exchange derivatives, typically forward contracts and options, to economically hedge the currency exposure of the Company’s global liquidity profile, including monetary assets or liabilities that are denominated in a non-functional currency of an entity, typically on a rolling 90-day basis, but may be for up to one year in the future. These derivatives are not accounted for as hedges, and changes in fair value are recorded each period in Other income (expense) in the Condensed Consolidated Statements of Income.

The notional and fair values of derivative instruments are as follows (in millions):

	Notional Amount				Net Amount of Derivative Assets  Presented in the Statements of Financial Position (1)				Net Amount of Derivative Liabilities  Presented in the Statements of Financial Position
	March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021
Foreign exchange contracts
Accounted for as hedges	$	631	$	629	$	26	$	27	$	—	$	—
Not accounted for as hedges (2)	402		412		2		2		—		—
Total	$	1,033	$	1,041	$	28	$	29	$	—	$	—

(1)Included within Other current assets ($17 million at March 31, 2022 and $21 million at December 31, 2021) or Other non-current assets ($11 million at March 31, 2022 and $8 million at December 31, 2021).

(2)These contracts typically are for 90-day durations and executed close to the last day of the most recent reporting month, thereby resulting in nominal fair values at the balance sheet date.

The amounts of derivative gains recognized in the Condensed Consolidated Financial Statements are as follows (in millions):

	Three Months Ended March 31,
	2022		2021
Gain recognized in Accumulated other comprehensive loss	$	1	$	13

The amounts of derivative gains (losses) reclassified from Accumulated other comprehensive loss to the Condensed Consolidated Statements of Income are as follows (in millions):

	Three Months Ended March 31,
	2022		2021
Total revenue	$	(1)	$	(1)

The Company estimates that approximately $3 million of pretax gains currently included within Accumulated other comprehensive loss will be reclassified into earnings in the next twelve months.

During the three months ended March 31, 2022 and March 31, 2021, the Company recorded a gain of $32 million and a loss of $7 million, respectively, in Other income (expense) for foreign exchange derivatives not designated or qualifying as hedges.