Derivative and hedging activities

3 Months Ended

Mar. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative and hedging activities

14.    Derivative and hedging activities

We engage in hedging activities to reduce our exposure to foreign currency exchange rates. Our hedging activities are designed to manage specific risks according to our strategies, as summarized below, which may change from time to time. Our hedging activities consist of the following:

•Economic hedges — We are exposed to changes in foreign currency exchange rates on certain of our euro-denominated term loans and notes that move inversely from our portfolio of euro-denominated intercompany loans. The currency effects for these non-derivative instruments are recorded through earnings in the period of change and substantially offset one another;

•Other hedging activities — Certain of our subsidiaries hedge short-term foreign currency denominated business transactions, external debt and intercompany financing transactions using

foreign currency forward contracts. These activities were not material to our consolidated financial statements; and

•Net investment hedge — We have designated €400.0 million of our 3.875% senior unsecured notes as a hedge of our net investment in certain European operations to manage our exposure to currency and exchange rate movements from these operations.

Net Investment Hedge

We designated all of our outstanding €400.0 million 3.875% senior unsecured notes, issued on July 17, 2020, and maturing on July 15, 2028, as a hedge of our net investment in certain of our European operations. For instruments that are designated and qualify as net investment hedges, the foreign currency transactional gains or losses are reported as a component of AOCI. The gains or losses would be reclassified into earnings upon a liquidation event or deconsolidation of a hedged foreign subsidiary.

Net investment hedge effectiveness is assessed based upon the change in the spot rate of the foreign currency denominated debt. The critical terms of the foreign currency notes match the portion of the net investments designated as being hedged. At March 31, 2021, the net investment hedge was equal to the designated portion of the European operations and were considered to be perfectly effective.

Non-derivative financial instruments which are designated as hedging instruments:

The accumulated loss related to the foreign currency denominated debt designated as net investment hedges classified in the foreign currency translation adjustment component of AOCI was $18.0 million and $37.6 million as of March 31, 2021 and December 31, 2020, respectively.

The amount of gain related to the foreign currency denominated debt designated as net investment hedges classified in the foreign currency translation adjustment component of other comprehensive income is presented below:

(in millions)	Three months ended March 31,
	2021		2020
Net investment hedges	$	19.6	$	—