Fair Value Measurements (Tables)

6 Months Ended

Jul. 01, 2023

Schedule of Financial Assets and Liabilities Carried at Fair Value

The Company’s financial assets and liabilities carried at fair value as of July 1, 2023, are classified below (in millions):


	Level 1		Level 2		Level 3		Total
Assets:

Forward interest rate swap contracts (2)	$	—	$	108	$	—	$	108
Investments related to the deferred compensation plan	38		—		—		38
Total Assets at fair value	$	38	$	108	$	—	$	146
Liabilities:
Foreign exchange contracts (1)	$	2	$	13	$	—	$	15
Forward interest rate swap contracts (2)	—		36		—		36
Liabilities related to the deferred compensation plan	38		—		—		38
Total Liabilities at fair value	$	40	$	49	$	—	$	89

The Company’s financial assets and liabilities carried at fair value as of December 31, 2022, are classified below (in millions):


	Level 1		Level 2		Level 3		Total
Assets:

Forward interest rate swap contracts (2)	$	—	$	72	$	—	$	72
Investments related to the deferred compensation plan	35		—		—		35
Total Assets at fair value	$	35	$	72	$	—	$	107
Liabilities:
Foreign exchange contracts (1)	$	5	$	14	$	—	$	19

Liabilities related to the deferred compensation plan	35		—		—		35
Total Liabilities at fair value	$	40	$	14	$	—	$	54

(1)The fair value of the foreign exchange contracts is calculated as follows:

•Fair value of regular forward contracts associated with forecasted sales hedges is calculated using the period-end exchange rate adjusted for current forward points.

•Fair value of hedges against net assets denominated in foreign currencies is calculated at the period-end exchange rate adjusted for current forward points unless the hedge has been traded but not settled at year end (Level 2). If this is the case, the fair value is calculated at the rate at which the hedge is being settled (Level 1).

(2)The fair value of forward interest rate swaps is based upon a valuation model that uses relevant observable market inputs at the quoted intervals, such as forward yield curves, and is adjusted for the Company’s credit risk and the interest rate swap terms.