We are exposed to various market risks relating to our ongoing business operations. The primary market risks, which are managed using derivative instruments, are foreign currency exchange rate risk and interest rate risk. In certain circumstances, we enter into foreign currency forward exchange contracts and cross-currency swaps to reduce the effects of fluctuating foreign currency exchange rates on our cash flows denominated in foreign currencies. Our exposure to market risk for changes in interest rates relates primarily to our long-term debt obligations. We have historically managed interest rate risk through the use of a combination of fixed and variable rate borrowings.

We use cross-currency swaps, forward contracts and a portion of our foreign currency denominated debt, a non-derivative financial instrument, to protect the value of our net investments in certain of our foreign subsidiaries. For derivative instruments that are designated and qualify as hedges of our net investments in foreign operations, the changes in fair values of the derivative instruments are recognized in foreign currency translation, a component of accumulated other comprehensive income (“AOCI”), to offset the changes in the values of the net investments being hedged. For non-derivative financial instruments that are designated and qualify as hedges of net investments in foreign operations, the change in the carrying value of the designated portion of the non-derivative financial instrument due to changes in foreign currency exchange rates is recorded in foreign currency translation adjustments.

The €400.0 ($419.2) notes due September 2022 and the €500.0 ($521.2) notes due June 2026 were designated as a hedge of our net investment in our foreign subsidiaries with a Euro-functional currency as of June 30, 2022.

In September 2019, we entered into a cross-currency swap agreement that net converts fixed-rate Swiss franc (“CHF”) payments to fixed-rate United States dollar payments. This swap was designated as a net investment hedge of our foreign subsidiary with CHF functional currency.

The effect of our net investment hedges on AOCI for the three and six months ended June 30, 2022 and 2021 was as follows:


	Gain (Loss) Recognized in Other Comprehensive Income
	Three Months Ended June 30,					Six Months Ended June 30,
Instrument	2022		2021			2022		2021
Euro Notes	$	52.5	$	(11.3	)	$	79.8	$	32.4
Cross-currency swaps		8.3		(7.2	)		11.2		13.3

We use cross-currency swaps to hedge the changes in cash flows of certain of our foreign currency denominated debt due to changes in foreign currency exchange rates. For our cross-currency swaps, we record the change in carrying value of the foreign currency denominated debt due to changes in exchange rates into earnings each period. The changes in fair value of the cross-currency swap derivatives are recorded in AOCI with an immediate reclassification into earnings for the change in fair value attributable to fluctuations in foreign currency exchange rates.

In April 2019, we entered into a cross-currency swap agreement to convert our intercompany fixed-rate, CHF denominated note, including the annual interest payment and the payment of remaining principal at maturity, to a fixed-rate Euro denominated note. The economic effect of the swap agreement is to eliminate the uncertainty of cash flows in CHF associated with the note by fixing the principal at €202.3 with a fixed annual interest rate of 1.256%. This hedging arrangement has been designated as a cash flow hedge. The swap had an original maturity of April 2022, which aligned to the term of the intercompany note. On March 17, 2022, we settled the swap ahead of its maturity date, resulting in a net cash inflow of $19.2. We simultaneously entered into new cross currency swaps, which we account for as fair value hedges, with maturity dates of April 2024. Refer to the "Fair Value Hedge" section below for additional detail. In September 2019, we entered into a cross-currency swap agreement to convert an additional intercompany fixed-rate CHF note, including the annual interest payment and the payment of remaining principal at maturity, to a fixed-rate Euro denominated note. The economic effect of the swap is identical to the original April 2019 swap, and fixes the principal of €55.4 with a fixed interest rate of 1.143%. The swap matures in September 2022, which aligns to term of the intercompany note.

We use forward currency exchange contracts to hedge the changes in cash flows of certain operational expenses denominated in foreign currency due to changes in foreign currency exchange rates. The changes in fair value of the forward currency exchange contracts derivatives are recorded in AOCI and reclassified into earnings when the underlying operating expense is recognized in earnings.

In September 2021, we entered into a series of forward currency exchange contracts denominated in GBP. The economic effect of the forward is to eliminate the uncertainty in cash flows in GBP associated with a portion of our forecasted IT contract spend in 2022 by fixing the amount at £6.0. Gains and losses from the hedge offset the foreign currency exchange impact of the contracts.

On June 9, 2022, we entered into a forward starting interest rate swap agreement with a notional amount of €300 million and a fixed rate of 1.936%, which was accounted for as a cash flow hedge, to hedge the interest rate exposure related to our anticipated issuance of €400 million of notes to repay our existing €400 million notes maturing in September 2022. Upon the issuance of the notes on June 30, 2022, we settled this forward starting interest rate swap, resulting in a gain of $2.0 million, which was recorded in accumulated other comprehensive income and which will be amortized over the term of the notes as an offset to interest expense.

We assessed the hedging relationship at the inception of the hedges in order to determine whether the derivatives that are used in the hedging transaction are highly effective in offsetting the cash flows of the hedged item and will continue to assess the relationship on an ongoing basis. We use the hypothetical derivative method in conjunction with regression analysis using a third-party valuation to measure effectiveness of our cross-currency swap agreements and our forward currency exchange contracts.

The following tables present the impact that changes in the fair values of derivatives designated as cash flow hedges had on other comprehensive income (“OCI”), AOCI and earnings for the three and six months ended June 30, 2022 and 2021:


	Gain (Loss) Recognized in OCI							Gain (Loss) Reclassified from AOCI into Income
	Three Months Ended June 30,						Location of Gain (Loss) Reclassified	Three Months Ended June 30,
Instrument	2022			2021			from AOCI into Income	2022			2021
Cross-currency swaps	$	3.3		$	2.2		Interest and other expenses, net	$	(3.0	)	$	(2.0	)
Foreign currency forward contracts		(0.2	)		—		Selling and administrative expenses		(0.3	)		—
Forward starting interest swap		2.0			—		Interest and other expenses, net		—			—


	Gain (Loss) Recognized in OCI							Gain (Loss) Reclassified from AOCI into Income
	Six Months Ended June 30,						Location of Gain (Loss) Reclassified	Six Months Ended June 30,
Instrument	2022			2021			from AOCI into Income	2022			2021
Cross-currency swaps	$	2.3		$	(3.1	)	Interest and other expenses, net	$	(2.1	)	$	3.2
Foreign currency forward contracts		(0.3	)		—		Selling and administrative expenses		(0.3	)		—
Forward starting interest swap		2.0			—		Interest and other expenses, net		—			—

We expect the net amount of pre-tax derivative gains included in AOCI at June 30, 2022 to be reclassified into earnings within the next 12 months will not be significant. The actual amount that will be reclassified to earnings over the next 12 months will vary due to future currency exchange rates.

We account for derivatives as fair value hedges when the hedged item is a recognized asset, liability, or firm commitment. We use fair value hedges to hedge the changes in cash flows of certain of our foreign currency intercompany denominated notes due to changes in foreign currency exchange rates. We record the change in carrying value of the foreign currency denominated notes due to changes in exchange rates into earnings each period. Gains and losses on the fair value hedges are recorded in earnings, offsetting gains and losses on the hedged item.

In March 2022, we entered into a cross-currency swap agreement to hedge our intercompany fixed-rate, CHF denominated note. The economic effect of the swap agreement is to eliminate the uncertainty of cash flows in CHF associated with the note due to changes in foreign currency exchange rates against our Euro functional subsidiary entity. The cross-currency swap matures in April 2024, which aligns the term of the intercompany note and has a fixed interest rate of 1.05973%. The cross-currency swaps are accounted for as fair value hedges. Gains and losses from the hedge offset the changes in the value of principal on the note due to changes in foreign exchange rates.

The following tables present the impact that the fair value hedges had on our Consolidated Statement of Income for the three and six months ended June 30, 2022 and 2021:


	Location of Gain (Loss)	Amount of Gain (Loss) Recognized in Income
Instrument	Recognized in Income	Three Months Ended June 30,					Six Months Ended June 30,
		2022			2021		2022			2021
Intercompany CHF note	Interest and other expenses, net	$	(5.1	)	$	—	$	(7.7	)	$	—
Cross-currency swaps	Interest and other expenses, net		4.7			—		7.3			—

We also use certain derivatives, which are not designated as hedging instruments, as economic hedges of foreign currency and interest rate exposure. For our forward contracts that are not designated as hedges, any gain or loss resulting from the change in fair value is recognized in current period earnings. These gains or losses are offset by the exposure related to receivables and payables with our foreign subsidiaries and to interest due on our Euro-denominated notes, which is paid annually in June and September. The effect of our forward contracts that are not designated as hedging instruments on the consolidated statements of operations for the three and six months ended June 30, 2022 was as follows:


	Location of Gain (Loss)	Amount of Gain (Loss) Recognized in Income
Instrument	Recognized in Income	Three Months Ended June 30,					Six Months Ended June 30,
		2022			2021		2022			2021
Foreign currency forward contracts	Interest and other expenses, net	$	(8.4	)	$	1.4	$	(13.2	)	$	(5.5	)

The following tables present the fair value of derivative and non-derivative assets and liabilities on the Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021:


	Assets
		June 30,		December 31,
	Balance Sheet Location	2022		2021
Instruments designated as cash flow hedges:
Cross-currency swaps	Accounts Receivable, net	$	4.7	$	24.7
Instruments designated as fair value hedges:
Cross-currency swaps	Accounts Receivable, net		7.3		—
Instruments not designated as hedges:
Foreign currency forward contracts	Accounts Receivable, net		0.1		—
Total instruments		$	12.1	$	24.7


	Liabilities
		June 30,		December 31,
	Balance Sheet Location	2022		2021
Instruments designated as net investment hedges:
Euro Notes due in 2022	Short-term borrowings and current maturities of long-term debt	$	419.2	$	454.4
Euro Notes due in 2026	Long-term debt		521.2		565.2
Cross-currency swaps	Accrued liabilities		12.3		24.2
Instruments designated as cash flow hedges:
Foreign currency forward contracts	Accrued liabilities		0.5		0.2
Instruments not designated as hedges:
Foreign currency forward contracts	Accrued liabilities		0.8		5.5
Total instruments		$	954.0	$	1,049.5

The carrying value of the long-term debt approximates fair value, except for the Euro-denominated notes, because the interest rates are variable and reflect current market rates. The fair value of the Euro-denominated notes, as observable at commonly quoted intervals (Level 2 inputs), was $1,343.6 and $1,064.0 as of June 30, 2022 and December 31, 2021, respectively, compared to a carrying value of $1,356.0 and $1,019.6, respectively.

Our deferred compensation plan assets were $115.2 and $138.0 as of June 30, 2022 and December 31, 2021, respectively. We determine the fair value of these assets, comprised of publicly traded securities, by using market quotes as of the last day of the period (Level 1 inputs).

We measure the fair value of the foreign currency forward contracts and cross-currency swaps at the value based on either directly or indirectly observable inputs from third parties (Level 2 inputs).