In the fiscal year ended December 31, 2023, the Company entered into derivative financial instruments to manage foreign exchange risk related to its ongoing business operations with the primary objective of reducing operating income and cash flow volatility associated with fluctuations in foreign exchange rates. The Company did not use any derivative instruments prior to the fiscal year ended December 31, 2023.

The net notional amounts of the Company’s outstanding derivative instruments were as follows:


	As of December 31,
	2023		2022
	(in thousands)
Derivatives designated as hedging instruments:
Foreign exchange contracts
Cash flow hedges	$	8,783,273	$	—
Total	$	8,783,273	$	—


	As of December 31, 2023
	Derivative Assets				Derivative Liabilities
	Other current assets		Other non-current assets		Accrued expenses and other liabilities		Other non-current liabilities
	(in thousands)
Derivatives designated as hedging instruments:
Foreign exchange contracts	$	26,416	$	4,518	$	140,089	$	46,575
Total	$	26,416	$	4,518	$	140,089	$	46,575

The Company classifies derivative instruments in the Level 2 category within the fair value hierarchy. These instruments are valued using industry standard valuation models that use observable inputs such as interest rate yield curves, and forward and spot prices for currencies.

As of December 31, 2023, the pre-tax net accumulated loss on our foreign currency cash flow hedges included in AOCI on the Consolidated Balance Sheets expected to be recognized in earnings within the next 12 months is $128 million.

In order to mitigate counterparty credit risk, the Company enters into master netting agreements with its counterparties for its foreign currency exchange contracts, which permit the parties to settle amounts on a net basis under certain conditions. The Company has elected to present its derivative assets and liabilities on a gross basis on its Consolidated Balance Sheets.

The Company also enters into collateral security arrangements with its counterparties that require the parties to post cash collateral when certain contractual thresholds are met. No cash collateral was received or posted by the Company as of December 31, 2023.

The potential offsetting effect to the Company’s derivative assets and liabilities under its master netting agreements and collateral security agreements were as follows:


	As of December 31, 2023
							Gross Amount Not Offset in the Consolidated Balance Sheets
	Gross Amount Recognized in the Consolidated Balance Sheets		Gross Amount Offset in the Consolidated Balance Sheets		Net Amount Presented in the Consolidated Balance Sheets		Financial Instruments		Collateral Received and Posted		Net Amount
	(in thousands)
Derivative assets	$	30,934	$	—	$	30,934	$	(27,246)	$	—	$	3,688
Derivative liabilities	186,664		—		186,664		(27,246)		—		159,418

The pre-tax gains (losses) on the Company’s cash flow hedges recognized in AOCI were as follows:


	Year Ended December 31,
	2023		2022		2021
	(in thousands)
Cash flow hedges:
Foreign exchange contracts (1)
Amount included in the assessment of effectiveness	$	(155,730)	$	—	$	—
Total	$	(155,730)	$	—	$	—

No gains or losses on derivative instruments were reclassified from AOCI into the Consolidated Statements of Operations in the year ended December 31, 2023.