Our primary objective in executing and holding derivative contracts is to reduce the volatility of earnings and cash flows associated with risks related to foreign currency exchange rates, interest rates, equity prices, and commodity prices. These derivative contracts reduce, but do not entirely eliminate, the aforementioned risks. Our policy is to use derivative contracts solely for managing risks and not for speculative purposes.

The fair values of derivative contracts are recognized within All other current assets, All other non-current assets, All other current liabilities, and All other non-current liabilities in the Consolidated Statements of Financial Position based upon the contractual timing of settlements for these contracts. We designate certain derivative contracts as hedging instruments in cash flow, fair value, or net investment hedges. We evaluate the effectiveness of our derivative contracts designated as hedging instruments on a quarterly basis.

We use foreign currency forward contracts to hedge the volatility of cash flows related to firm commitments and forecasted transactions, including intercompany transactions, denominated in foreign currencies other than a subsidiary’s functional currency. The maximum length of time over which we hedge forecasted transactions is two years. As of December 31, 2024, these contracts have a maximum remaining maturity of 15 months.

For derivative instruments designated as cash flow hedges, changes in the fair value of designated hedging instruments are initially recorded as a component of AOCI and subsequently reclassified to earnings in the period in which the hedged transaction affects earnings and to the same financial statement line item impacted by the hedged transaction. As of December 31, 2024, we expect to reclassify $22 million of pre-tax net deferred gain associated with designated cash flow hedges to earnings in the next 12 months, contemporaneously with the impact on earnings of the related hedged transactions.

We use cross-currency interest rate swaps and foreign currency forward contracts in combination with foreign currency option contracts to hedge the foreign currency risk associated with our net investment in foreign operations. As of December 31, 2024, these contracts were designated as hedges of our net investment in foreign operations, primarily in Euro and Chinese Renminbi currencies.

We use the spot method to assess hedge effectiveness for our net investment hedges. Changes in the fair value of the designated hedging instruments attributable to fluctuations in foreign currency to USD spot exchange rates are initially recorded and held as a component of the CTA portion of AOCI until the hedged foreign operation is either sold or substantially liquidated. Changes in fair value of the portion of net investment hedging derivatives excluded from the assessment of effectiveness are recorded in CTA and then recognized within Interest and other financial charges – net in the Consolidated and Combined Statements of Income using a systematic and rational method over the life of the hedge. Excluded components on the cross-currency swaps designated as net investment hedges, in the form of accrued interest, are recorded within Interest and other financial charges – net in the Consolidated and Combined Statements of Income.

The cash flows associated with derivatives designated as net investment hedges are recorded in All other investing activities – net in the Consolidated and Combined Statements of Cash Flows. For the year ended December 31, 2024, All other investing activities – net includes a $94 million payment for the settlement of cross-currency swaps that were designated in net investment hedges. Cash flows from the periodic interest settlements on the cross-currency swaps are recorded in All other operating activities – net in the Consolidated and Combined Statements of Cash Flows.

We use interest rate swaps to hedge the interest rate risk on our fixed rate borrowings. These derivatives are designated as fair value hedges to hedge the changes in fair value due to benchmark interest rate risk of specific designated cash flows of our senior unsecured notes. In the first quarter and fourth quarter of 2024, we executed interest rate swap contracts with an aggregate notional of $700 million and $1,000 million, respectively, to hedge the benchmark interest rate risk of specific designated cash flows of a senior unsecured note.

We record the changes in fair value on these swap contracts in Interest and other financial charges – net in our Consolidated and Combined Statements of Income, the same line item where the offsetting change in the fair value of the designated cash flows of the senior unsecured note is recorded as a basis adjustment.

Cash flows for the periodic interest settlements on the interest rate swaps are recorded in All other operating activities – net in the Consolidated and Combined Statements of Cash Flows.

We also execute derivative instruments, such as foreign currency forward contracts and equity-linked total return swaps, which are not designated as qualifying hedges. These derivatives serve as economic hedges of foreign currency exchange rate and equity price risks. We also identify and record foreign currency-related features in our purchase or sales contracts where the currency is not the local or functional currency of any substantive party to the contract and record them as embedded derivatives.

The changes in fair value of derivatives not designated in qualifying hedge transactions are recorded in Cost of products, Cost of services, SG&A, and Other (income) expense – net in the Consolidated and Combined Statements of Income based on the nature of the underlying hedged transaction. Changes in fair value of embedded derivatives are recognized in Other (income) expense – net in the Consolidated and Combined Statements of Income.

The cash flows associated with derivatives not designated but used as economic hedges are recorded, based on the nature of the underlying hedged transaction, in All other operating activities – net and All other investing activities – net in the Consolidated and Combined Statements of Cash Flows. The cash flows related to embedded derivatives are included in All other operating activities – net in the Consolidated and Combined Statements of Cash Flows.


Fair Value of Derivatives	December 31, 2024						December 31, 2023
	Gross Notional		Fair Value – Assets		Fair Value – Liabilities		Gross Notional		Fair Value – Assets		Fair Value – Liabilities
Foreign currency forward contracts	$	1,210	$	43	$	11	$	1,356	$	8	$	30
Derivatives accounted for as cash flow hedges	1,210		43		11		1,356		8		30
Cross-currency swaps(1)	1,995		15		46		2,209		—		204
Foreign currency forward and options contracts	1,731		30		18		991		9		11
Derivatives accounted for as net investment hedges	3,726		45		64		3,200		9		215
Interest rate swaps(1)	2,700		—		51		1,000		35		10
Derivatives accounted for as fair value hedges	2,700		—		51		1,000		35		10
Foreign currency forward contracts	3,925		11		29		3,597		19		12
Other derivatives(1)(2)	370		47		—		438		57		2



Derivatives not designated as hedging instruments	4,294		57		29		4,035		76		14
Total derivatives	$	11,930	$	145	$	155	$	9,591	$	128	$	269

(1) Accrued interest was immaterial for the periods presented and is excluded from fair value. These amounts are recognized within All other current assets and All other current liabilities in the Consolidated Statements of Financial Position.


	December 31, 2024				December 31, 2023
	Carrying amount		Cumulative basis adjustment included in the carrying amount		Carrying amount		Cumulative basis adjustment included in the carrying amount
Long-term borrowings designated in fair value hedges	$	2,644	$	(51)	$	1,023	$	25

Under the master arrangements with the respective counterparties to our derivative contracts, in certain circumstances and subject to applicable requirements, we are allowed to net settle transactions with a single net amount payable by one party to the other. However, we have elected to present the derivative assets and derivative liabilities on a gross basis in our Consolidated Statements of Financial Position and in the table above.

As of December 31, 2024 and 2023, the potential effect of rights of offset associated with the derivative contracts would be an offset to both assets and liabilities by $77 million and $41 million, respectively.


Pre-tax Gains (Losses) Recognized in OCI Related to Cash Flow and Net Investment Hedges
	For the years ended December 31
		2024		2023		2022
Cash flow hedges		$	44	$	(6)	$	37
Net investment hedges(1)		80		(97)		(111)


Derivative Financial Instruments and Hedging Activity	For the year ended December 31, 2024
	Cost of products		Cost of services		SG&A		Interest and other financial charges – net		Other(4)

Foreign currency forward contracts	$	(4)	$	(1)	$	—	$	—	$	—
Effects of cash flow hedges	(4)		(1)		—		—		—
Cross-currency swaps	—		—		—		31		—
Foreign currency forward and options contracts	—		—		—		11		—
Effects of net investment hedges(1)	—		—		—		42		—

Interest rate swaps(2)	—		—		—		(103)		—
Debt basis adjustment on Long-term borrowings	—		—		—		76		—

Effects of fair value hedges	—		—		—		(27)		—
Foreign currency forward contracts	(37)		(9)		—		—		1



Other derivatives(3)	—		—		8		—		37
Effects of derivatives not designated as hedging instruments	(37)		(9)		8		—		38























	For the year ended December 31, 2023
	Cost of products		Cost of services		SG&A		Interest and other financial charges – net		Other(4)

Foreign currency forward contracts	$	23	$	6	$	—	$	—	$	—
Effects of cash flow hedges	23		6		—		—		—
Cross-currency swaps	—		—		—		34		—
Foreign currency forward and option contracts	—		—		—		3		—
Effects of net investment hedges(1)	—		—		—		37		—

Interest rate swaps(2)	—		—		—		24		—
Debt basis adjustment on Long-term borrowings	—		—		—		(25)		—

Effects of fair value hedges	—		—		—		(1)		—
Foreign currency forward contracts	3		2		—		—		5
Other derivatives(3)	—		—		10		—		47
Effects of derivatives not designated as hedging instruments	3		2		10		—		52


	For the year ended December 31, 2022
	Cost of products		Cost of services		SG&A		Interest and other financial charges – net		Other(4)

Foreign currency forward contracts	$	54	$	—	$	—	$	—	$	—
Effects of cash flow hedges	54		—		—		—		—
Cross-currency swaps	—		—		—		—		—
Foreign currency forward and option contracts	—		—		—		—		—
Effects of net investment hedges(1)	—		—		—		—		—

Interest rate swaps(2)	—		—		—		—		—
Debt basis adjustment on Long-term borrowings	—		—		—		—		—

Effects of fair value hedges	—		—		—		—		—
Foreign currency forward contracts	(96)		—		—		—		11



Other derivatives(3)	—		—		—		—		11
Effects of derivatives not designated as hedging instruments	(96)		—		—		—		22

The Company would be exposed to credit-related losses in the event of non-performance by counterparties on executed derivative instruments. The credit exposure of derivative contracts is represented by the fair value of contracts as of the reporting date. The fair value of the Company’s derivatives can change significantly from period to period based on, among other factors, market movements, and changes in our positions.

We manage concentration of counterparty credit risk by limiting acceptable counterparties to major financial institutions with investment grade credit ratings, by limiting the amount of credit exposure to individual counterparties, and by actively monitoring counterparty credit ratings and the amount of individual credit exposure.

We also employ master netting arrangements that limit the risk of counterparty non-payment on a particular settlement date to the net gain that would have otherwise been received from the counterparty. Although not completely eliminated, we do not consider the risk of counterparty default to be significant as a result of these protections. None of our derivative instruments are subject to collateral or other security arrangements, nor do they contain provisions that are dependent on our credit ratings from any credit rating agency.


Fair Value of Assets and Liabilities Measured on a Recurring Basis
	As of December 31, 2024								As of December 31, 2023
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	—	$	312	$	—	$	312	$	—	$	200	$	—	$	200
Investment securities	32		—		—		32		31		—		—		31
Derivatives	—		145		—		145		—		128		—		128
Liabilities:
Derivatives	—		155		—		155		—		269		—		269
Contingent consideration	—		—		34		34		—		—		44		44

As of December 31, 2024 and 2023, Cash, cash equivalents, and restricted cash of $2,889 million and $2,504 million, respectively, included money market funds of $312 million and $200 million, and other cash equivalents of $1,573 million and $1,023 million, respectively. The carrying values of the other cash equivalents approximates the fair value due to their short maturities and are valued using Level 1 or Level 2 inputs. Refer to Note 18, “Supplemental Financial Information” for further information.

Derivatives are measured at fair value using a discounted cash flow method or option models using interest rates, foreign exchange spot and forward rates and yield curves observable at commonly quoted intervals, implied volatilities, and credit spreads as key inputs. Unobservable inputs relate to our own credit risk which is not significant to the overall measurement of fair value.

Contingent consideration is recorded at fair value based on estimates of future cash flows in connection with business acquisitions. As the valuation of these liabilities is based on inputs that are less observable or not observable in the market, the determination of fair value is classified within Level 3 of the fair value hierarchy.

Changes in fair value measurements of assets and liabilities measured at fair value on a non-recurring basis, such as equity method investments, equity investments without readily determinable fair value, financing receivables, and long-lived assets, were not material for the years ended December 31, 2024, 2023, and 2022.

The estimated fair value of borrowings as of December 31, 2024 and 2023 was $9,374 million and $9,959 million, respectively, compared to a carrying value (which only includes a reduction for unamortized debt issuance costs and discounts and cumulative basis adjustment) of $8,951 million and $9,442 million, respectively. The fair value of our borrowings includes accrued interest and is determined based on observable and quoted prices and spreads of comparable debt and benchmark securities and is considered Level 2 in the fair value hierarchy. See Note 9, “Borrowings” and Note 18, “Supplemental Financial Information” for further information.