Fair Value Measurements

12 Months Ended

Dec. 31, 2021

The fair values of cash equivalents, trade accounts receivable, settlement assets and obligations, accounts payable, and client deposits approximate their respective carrying values due to the short period of time to maturity. The Company’s derivative instruments are measured on a recurring basis based on foreign currency spot rates and forwards quoted by banks and foreign currency dealers and are marked-to-market each period (see Note 14). Contingent consideration related to certain of the Company’s acquisitions (see Note 4) is estimated based on the present value of a probability-weighted assessment approach derived from the likelihood of achieving the earn-out criteria. The fair value of the Company’s contingent liability for current expected credit losses associated with its debt guarantees, as further described below, is estimated based on assumptions of future risk of default and the corresponding level of credit losses at the time of default.

Assets and liabilities measured at fair value on a recurring basis consisted of the following at December 31:



			Fair Value
(In millions)	Classification	Fair Value Hierarchy	2021		2020
Assets
Cash flow hedges	Prepaid expenses and other current assets	Level 2	$	6	$	9

Liabilities
Contingent consideration	Accounts payable and accrued expenses	Level 3	$	2	$	46
Contingent consideration	Other long-term liabilities	Level 3	32		—
Contingent debt guarantee	Accounts payable and accrued expenses	Level 3	4		—
Contingent debt guarantee	Other long-term liabilities	Level 3	—		8

The Company’s senior notes are recorded at amortized cost, but measured at fair value for disclosure purposes. The estimated fair value of senior notes was based on matrix pricing which considers readily observable inputs of comparable securities (Level 2 of the fair value hierarchy). The carrying value of the Company’s foreign lines of credit, debt associated with the receivables securitization agreement, term loan credit agreement, commercial paper notes and revolving credit facility borrowings approximates fair value as these instruments have variable interest rates and the Company has not experienced any change to its credit ratings (Level 2 of the fair value hierarchy). The estimated fair value of total debt, excluding finance leases and other financing obligations, was $21.8 billion and $22.5 billion at December 31, 2021 and 2020, respectively, and the carrying value was $20.4 billion and $19.9 billion at December 31, 2021 and 2020, respectively.

The Company maintains a liability for its non-contingent obligations to perform over the term of its debt guarantee arrangements with the Lending Joint Ventures (see Note 9), which is reported within accounts payable and accrued expenses and other long-term liabilities in the consolidated balance sheets at December 31, 2021 and 2020, respectively. The non-contingent component of the Company’s debt guarantee arrangements is recorded at amortized cost but measured at fair value for disclosure purposes. The carrying value of the Company’s non-contingent liability of $10 million and $18 million approximates the fair value at December 31, 2021 and 2020, respectively (Level 3 of the fair value hierarchy). Such guarantees will be amortized in future periods over the contractual term which ends in March 2023. In addition, the Company has recorded, in conjunction with the adoption of CECL, a contingent liability ($4 million and $8 million as reported within accounts payable and accrued expenses and other long-term liabilities in the consolidated balance sheets at December 31, 2021 and 2020, respectively), representing the current expected credit losses to which the Company is exposed. This contingent liability is estimated based on certain financial metrics of the Lending Joint Ventures and historical industry data, which is used to develop assumptions of the likelihood the guaranteed parties will default and the level of credit losses in the event a default occurs (Level 3 of the fair value hierarchy). The Company recognized $12 million, $13 million and $7 million during the years ended December 31, 2021, 2020 and 2019, respectively, within other income (expense) in its consolidated statements of income related to its release from risk under the non-contingent guarantees as well as a change in the provision of estimated credit losses associated with the indebtedness of the Lending Joint Ventures. The Company has not made any payments under the guarantees, nor has it been called upon to do so.In addition, certain of the Company’s non-financial assets are measured at fair value on a non-recurring basis, including property and equipment, lease ROU assets, equity securities without a readily determinable fair value, goodwill and other intangible assets, and are subject to fair value adjustment in certain circumstances. Additional information about fair value adjustments recorded on a non-recurring basis during the years ended December 31, 2021, 2020 and 2019 is included in Note 17 to the consolidated financial statements.