Derivatives and Hedging

12 Months Ended

Dec. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging

Derivatives and HedgingThe 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 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 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
As of December 31	2022		2021		2022		2021		2022		2021
Foreign exchange contracts
Accounted for as hedges	$	618	$	629	$	12	$	27	$	2	$	—
Not accounted for as hedges (3)	312		412		—		2		1		—
Total	$	930	$	1,041	$	12	$	29	$	3	$	—

(1)Included within Other current assets ($3 million in 2022 and $21 million in 2021) or Other non-current assets ($9 million in 2022 and $8 million in 2021).

(2)Included within Other current liabilities ($2 million in 2022) or Other non-current liabilities ($1 million in 2022).

(3)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 (losses) recognized in the Consolidated Financial Statements are as follows (in millions):

	2022		2021		2020
(Loss) gain recognized in Accumulated other comprehensive loss	$	(15)	$	—	$	1

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

	Years Ended December 31
	2022		2021		2020
Total revenue	$	2	$	(3)	$	(14)
Compensation and benefits	—		1		—
Interest expense	—		—		(1)
Total	$	2	$	(2)	$	(15)

The Company estimates that approximately $10 million of pretax loss currently included within Accumulated other comprehensive loss will be reclassified into earnings in the next twelve months.

The Company recorded a gain of $11 million in 2022, a loss of $24 million in 2021, and a gain of $1 million in 2020 in Other income (expense) for foreign exchange derivatives not designated or qualifying as hedges.