Fair Value Measurements and Financial Instruments

9 Months Ended

Sep. 30, 2024

Fair Value Measurements and Financial Instruments

The Company uses available market information and other valuation methodologies in assessing the fair value of financial instruments. Judgment is required in interpreting market data to develop the estimates of fair value and, accordingly, changes in assumptions or the estimation methodologies may affect the fair value estimates. The Company is exposed to the risk of credit loss in the event of nonperformance by counterparties to financial instrument contracts; however, nonperformance is considered unlikely and any nonperformance is unlikely to be material, as it is the Company’s policy to contract only with diverse, credit-worthy counterparties based upon both strong credit ratings and other credit considerations.

The Company is exposed to market risk from foreign currency exchange rates, interest rates and commodity price fluctuations. Volatility relating to these exposures is managed on a global basis by utilizing a number of techniques, including working capital management, sourcing strategies, selling price increases, selective borrowings in local currencies and entering into selective derivative instrument transactions, issued with standard features, in accordance with the Company’s treasury and risk management policies, which prohibit the use of derivatives for speculative purposes and leveraged derivatives for any purpose. It is the Company’s policy to enter into derivative instrument contracts with terms that match the underlying exposure being hedged.

The Company’s derivative instruments include forward-starting interest rate swaps, foreign currency contracts and commodity contracts. The Company utilizes forward-starting interest rate swaps to mitigate the risk of variability in interest rate for future debt issuances and these swaps are valued using observable benchmark rates (Level 2 valuation). The Company utilizes foreign currency contracts, including forward and swap contracts, option contracts, local currency deposits and local currency borrowings to hedge portions of its foreign currency purchases, assets and liabilities arising in the normal course of business and the net investment in certain foreign subsidiaries. These contracts are valued using observable market rates (Level 2 valuation). Commodity futures contracts are utilized to hedge the purchases of raw materials used in production. These contracts are measured using quoted commodity exchange prices (Level 1 valuation). The duration of foreign currency and commodity contracts generally does not exceed 12 months.

The following table summarizes the fair value of the Company’s derivative instruments and other financial instruments which are carried at fair value in the Company’s Condensed Consolidated Balance Sheets at September 30, 2024 and December 31, 2023:


	Assets					Liabilities
	Account	Fair Value					Account		Fair Value
Designated derivative instruments		September 30, 2024		December 31, 2023						September 30, 2024		December 31, 2023




Foreign currency contracts	Other current assets	$	31	$	19			Other accruals		$	39	$	25

Commodity contracts	Other current assets	—		—				Other accruals		1		1
Total designated		$	31	$	19					$	40	$	26

Other financial instruments
Marketable securities	Other current assets	$	260	$	179
Total other financial instruments		$	260	$	179

The carrying amount of cash, cash equivalents, marketable securities, accounts receivable and short-term debt approximated fair value as of September 30, 2024 and December 31, 2023. The estimated fair value of the Company’s long-term debt, including the current portion, as of September 30, 2024 and December 31, 2023, was $7,565 and $7,862, respectively, and the related carrying value was $7,929 and $8,239, respectively. The estimated fair value of long-term debt was derived principally from quoted prices on the Company’s outstanding fixed-term notes (Level 2 valuation).

The following tables present the notional values as of:


	September 30, 2024
	Foreign Currency Contracts		Foreign Currency Debt		Commodity Contracts		Total
Fair Value Hedges	$	1,732	$	—	$	—	$	1,732
Cash Flow Hedges	1,022		—		26		1,048
Net Investment Hedges	474		4,269		—		4,743


	December 31, 2023
	Foreign Currency Contracts		Foreign Currency Debt		Commodity Contracts		Total
Fair Value Hedges	$	1,625	$	—	$	—	$	1,625
Cash Flow Hedges	869		—		39		908
Net Investment Hedges	280		3,908		—		4,188

The amount of gain (loss) recognized in income associated with fair value hedges did not have a material impact on the Company’s Condensed Consolidated Financial Statements during the three and nine months ended September 30, 2024.

The amount of gain (loss) recognized in income and Accumulated Other Comprehensive Income (AOCI) associated with cash flow hedges did not have a material impact on the Company’s Condensed Consolidated Financial Statements during the three and nine months ended September 30, 2024.

The following table presents the amount of gain (loss) on net investment hedges recognized in the Company’s AOCI:


	Gain (Loss) Recognized in AOCI
	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Hedging instruments:
Foreign currency contracts	$	(4)	$	(37)	$	20	$	(19)
Foreign currency debt	(216)		50		(82)		90
Total gain (loss) on net investment hedges	$	(220)	$	13	$	(62)	$	71