Derivative Financial Instruments

3 Months Ended

Mar. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

Interest Rate Risk Management

To reduce the interest rate risk inherent in the Company’s variable rate debt, the Company utilizes interest rate swap agreements to convert a portion of its variable rate borrowings into a fixed rate obligation. These interest rate swap agreements are designated as cash flow hedges and fix the LIBOR portion of the Company’s US-dollar denominated variable rate borrowings (Note 10). If an interest rate swap agreement is terminated prior to its maturity, the amount previously recorded in Accumulated other comprehensive income (loss), net is recognized into earnings over the period that the hedged transaction impacts earnings. If the hedging relationship is discontinued because it is probable that the forecasted transaction will not occur according to the original strategy, any related amounts previously recorded in Accumulated other comprehensive income (loss), net are recognized into earnings immediately.

US-dollar interest rate swap derivative arrangements are as follows:

As of March 31, 2014
Notional Value	Effective Date	Expiration Date	Fixed Rate (1)
(In $ millions)
500	January 2, 2014	January 2, 2016	1.02	%

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⁽¹⁾  Fixes the LIBOR portion of the Company's US-dollar denominated variable rate borrowings (Note 10).

As of December 31, 2013
Notional Value	Effective Date	Expiration Date	Fixed Rate (1)
(In $ millions)
1,100	January 2, 2012	January 2, 2014	1.71	%
500	January 2, 2014	January 2, 2016	1.02	%

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⁽¹⁾  Fixes the LIBOR portion of the Company's US-dollar denominated variable rate borrowings (Note 10).

Foreign Exchange Risk Management

Certain subsidiaries have assets and liabilities denominated in currencies other than their respective functional currencies, which creates foreign exchange risk. The Company also enters into foreign currency forwards and swaps to minimize its exposure to foreign currency fluctuations. Through these instruments, the Company mitigates its foreign currency exposure on transactions with third party entities as well as intercompany transactions. The foreign currency forwards and swaps are not designated as hedges under FASB ASC Topic 815, Derivatives and Hedging ("FASB ASC Topic 815"). Gains and losses on foreign currency forwards and swaps entered into to offset foreign exchange impacts on intercompany balances are classified as Other income (expense), net, in the unaudited interim consolidated statements of operations. Gains and losses on foreign currency forwards and swaps entered into to offset foreign exchange impacts on all other assets and liabilities are classified as Foreign exchange gain (loss), net, in the unaudited interim consolidated statements of operations.

Gross notional values of the foreign currency forwards and swaps are as follows:

	As of March 31, 2014	As of December 31, 2013
	(In $ millions)
Total	893	869

Commodity Risk Management

The Company has exposure to the prices of commodities in its procurement of certain raw materials. The Company manages its exposure to commodity risk primarily through the use of long-term supply agreements, multi-year purchasing and sales agreements and forward purchase contracts. The Company regularly assesses its practice of using forward purchase contracts and other raw material hedging instruments in accordance with changes in economic conditions. Forward purchases and swap contracts for raw materials are principally settled through physical delivery of the commodity. For qualifying contracts, the Company has elected to apply the normal purchases and normal sales exception of FASB ASC Topic 815 based on the probability at the inception and throughout the term of the contract that the Company would not settle net and the transaction would result in the physical delivery of the commodity. As such, realized gains and losses on these contracts are included in the cost of the commodity upon the settlement of the contract.

Information regarding changes in the fair value of the Company’s derivative arrangements is as follows:

	Three Months Ended March 31,
	2014					2013
	Gain (Loss) Recognized in Other Comprehensive Income (Loss)		Gain (Loss) Recognized in Earnings (Loss)			Gain (Loss) Recognized in Other Comprehensive Income (Loss)		Gain (Loss) Recognized in Earnings (Loss)
	(In $ millions)
Designated as Cash Flow Hedges
Interest rate swaps	—	(1)	—			—	(2)	(2	)	(3)
Not Designated as Hedges
Interest rate swaps	—		—			—		—
Foreign currency forwards and swaps	—		(2	)	(4)	—		3		(4)
Total	—		(2	)		—		1

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⁽¹⁾ Amount excludes $3 million of tax expense recognized in Other comprehensive income (loss).

⁽²⁾  Amount excludes $1 million of tax expense recognized in Other comprehensive income (loss).

⁽³⁾  Amount represents reclassification from Accumulated other comprehensive income (loss), net and is included in Interest expense in the unaudited interim consolidated statements of operations.

⁽⁴⁾  Included in Foreign exchange gain (loss), net for operating activity or Other income (expense), net for non-operating activity in the unaudited interim consolidated statements of operations.

See Note 17 - Fair Value Measurements for additional information regarding the fair value of the Company’s derivative arrangements.

Certain of the Company's foreign currency forwards and swaps and interest rate swap arrangements permit the Company to net settle all contracts with the counterparty through a single payment in an agreed upon currency in the event of default or early termination of the contract, similar to a master netting arrangement. The Company's interest rate swap agreements are subject to cross collateralization under the Guarantee and Collateral Agreement entered into in conjunction with the Term loan borrowings (Note 10).

	As of March 31, 2014	As of December 31, 2013
	(In $ millions)
Derivative Assets
Gross amount recognized	4	1
Gross amount offset in the consolidated balance sheets	—	—
Net amount presented in the consolidated balance sheets	4	1
Gross amount not offset in the consolidated balance sheets	4	1
Net amount	—	—

	As of March 31, 2014	As of December 31, 2013
	(In $ millions)
Derivative Liabilities
Gross amount recognized	10	16
Gross amount offset in the consolidated balance sheets	—	1
Net amount presented in the consolidated balance sheets	10	15
Gross amount not offset in the consolidated balance sheets	4	1
Net amount	6	14