Derivatives and Fair Value Disclosures

3 Months Ended

Mar. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Fair Value Disclosures

6. DERIVATIVES AND FAIR VALUE DISCLOSURES

We are exposed to the impact of changes in foreign currency exchange rates and interest rates in the normal course of business. Our financial risk management program is designed to manage the exposure arising from this cash flow risk and uses derivative financial instruments to minimize this risk. We do not enter into derivative financial instruments for trading or speculative purposes.

Assets and Liabilities that are non-designated hedging instruments

Foreign currency exchange rate forward contracts

From time to time, we enter into non-designated foreign currency exchange rate forward contracts to manage foreign currency balance sheet exposure risk. These forward agreements are related to foreign currency balance sheet exposure resulting from intercompany loans and provide economic hedges but were not designated as hedges for accounting purposes. The terms of these forward contracts are approximately one month and are expected to be settled in cash upon maturity. The following table presents the notional amounts and fair value of our derivative instruments included in accrued expenses and other current liabilities on our condensed consolidated balance sheets:

	March 31, 2022				December 31, 2021
(In millions)	Notional Amount		Liability		Notional Amount		Liability
Non-Designated Hedging Instruments
Foreign currency exchange rate forward contracts	$	70	$	1	$	56	$	—
Total contracts	$	70	$	1	$	56	$	—

The estimated fair value of our forward contracts is based on month-end spot rates adjusted by market-based current activity and are classified as level 2 instruments. The changes in the fair values of these foreign currency forward exchange contracts and the underlying hedged exposures are generally offsetting and recorded immediately in other, net on the condensed consolidated statement of operations. The loss recognized from our forward contracts for the three months ended March 31, 2022 was not material.

There were no changes in valuation approaches or techniques during the three months ended March 31, 2022. See Note 14 - Fair Value in our Form 10-K for a description of our valuation techniques.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Other than our foreign currency contracts there were no additional assets and liabilities measured on a recurring basis as of March 31, 2022 and December 31, 2021.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities may be required to be measured at fair value on a nonrecurring basis. These assets and liabilities are recognized at amounts equal to the fair value determined at the date of acquisition or purchase. We do not periodically adjust carrying value to fair value for these assets or liabilities; rather, the carrying value of the asset is reduced to its fair value when there is evidence of impairment. We did not have any assets or liabilities measured at fair value on a nonrecurring basis during the three months ended March 31, 2022.

Assets and Liabilities Not Measured at Fair Value

Financial Assets and Liabilities

The carrying amounts reported on the condensed consolidated balance sheets for cash and cash equivalents, accounts receivables, other receivables, accounts payable, and accrued expenses approximate their fair value due to the short maturity of those instruments.

Long-term Debt

Our long-term debt is classified as a level 2 instrument. The carrying amount of the term loan approximates fair value given the underlying interest rate applied to such amounts outstanding is currently reset to the prevailing monthly market rate.

Derivatives and Fair Value Disclosure

6. DERIVATIVES AND FAIR VALUE DISCLOSURES

We are exposed to the impact of changes in foreign currency exchange rates and interest rates in the normal course of business. Our financial risk management program is designed to manage the exposure arising from this cash flow risk and uses derivative financial instruments to minimize this risk. We do not enter into derivative financial instruments for trading or speculative purposes.

Assets and Liabilities that are non-designated hedging instruments

Foreign currency exchange rate forward contracts

From time to time, we enter into non-designated foreign currency exchange rate forward contracts to manage foreign currency balance sheet exposure risk. These forward agreements are related to foreign currency balance sheet exposure resulting from intercompany loans and provide economic hedges but were not designated as hedges for accounting purposes. The terms of these forward contracts are approximately one month and are expected to be settled in cash upon maturity. The following table presents the notional amounts and fair value of our derivative instruments included in accrued expenses and other current liabilities on our condensed consolidated balance sheets:

	March 31, 2022				December 31, 2021
(In millions)	Notional Amount		Liability		Notional Amount		Liability
Non-Designated Hedging Instruments
Foreign currency exchange rate forward contracts	$	70	$	1	$	56	$	—
Total contracts	$	70	$	1	$	56	$	—

The estimated fair value of our forward contracts is based on month-end spot rates adjusted by market-based current activity and are classified as level 2 instruments. The changes in the fair values of these foreign currency forward exchange contracts and the underlying hedged exposures are generally offsetting and recorded immediately in other, net on the condensed consolidated statement of operations. The loss recognized from our forward contracts for the three months ended March 31, 2022 was not material.

There were no changes in valuation approaches or techniques during the three months ended March 31, 2022. See Note 14 - Fair Value in our Form 10-K for a description of our valuation techniques.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Other than our foreign currency contracts there were no additional assets and liabilities measured on a recurring basis as of March 31, 2022 and December 31, 2021.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities may be required to be measured at fair value on a nonrecurring basis. These assets and liabilities are recognized at amounts equal to the fair value determined at the date of acquisition or purchase. We do not periodically adjust carrying value to fair value for these assets or liabilities; rather, the carrying value of the asset is reduced to its fair value when there is evidence of impairment. We did not have any assets or liabilities measured at fair value on a nonrecurring basis during the three months ended March 31, 2022.

Assets and Liabilities Not Measured at Fair Value

Financial Assets and Liabilities

The carrying amounts reported on the condensed consolidated balance sheets for cash and cash equivalents, accounts receivables, other receivables, accounts payable, and accrued expenses approximate their fair value due to the short maturity of those instruments.

Long-term Debt

Our long-term debt is classified as a level 2 instrument. The carrying amount of the term loan approximates fair value given the underlying interest rate applied to such amounts outstanding is currently reset to the prevailing monthly market rate.