Derivatives and Hedging

12 Months Ended

Dec. 31, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging

Derivatives and Hedging

The Company is exposed to market risks, including changes in foreign currency exchange rates and interest rates. To manage the risk related to these exposures, the Company enters into various derivative instruments that reduce these risks by creating offsetting exposures. The Company does not enter into derivative transactions for trading or speculative purposes.

Foreign Exchange Risk Management

The Company is exposed to foreign exchange risk when it earns revenues, pays expenses, or enters into monetary intercompany transfers denominated in a currency that differs from its functional currency, or other transactions that are denominated in a currency other than its functional currency. The Company uses foreign exchange derivatives, typically forward contracts, options and cross-currency swaps, to reduce its overall exposure to the effects of currency fluctuations on cash flows. These exposures are hedged, on average, for less than two years. These derivatives are accounted for as hedges, and changes in fair value are recorded each period in Other comprehensive income (loss) in the Consolidated Statements of Comprehensive Income.

The Company also uses foreign exchange derivatives, typically forward contracts and options to economically hedge the currency exposure of the Company's global liquidity profile, including monetary assets or liabilities that are denominated in a non-functional currency of an entity, typically on a rolling 30-day basis, but may be for up to one year in the future. These derivatives are not accounted for as hedges, and changes in fair value are recorded each period in Other income in the Consolidated Statements of Income.

The notional and fair values of derivative instruments are as follows (in millions):

	Notional Amount				Derivative Assets (1)				Derivative Liabilities (2)
As of December 31	2015		2014		2015		2014		2015		2014
Foreign exchange contracts:
Accounted for as hedges	778		1,200		32		46		18		58
Not accounted for as hedges (3)	280		165		—		—		—		—
Total	$	1,058	$	1,365	$	32	$	46	$	18	$	58

(1) Included within Other current assets ($15 million in 2015 and $24 million in 2014, respectively) or Other non-current assets ($17 million in 2015 and $22 million in 2014, respectively)

(2) Included within Other current liabilities ($13 million in 2015 and $52 million in 2014, respectively) or Other non-current liabilities ($5 million in 2015 and $6 million in 2014, respectively)

(3) These contracts typically are for 30 day durations and executed close to the last day of the most recent reporting month, thereby resulting in nominal fair values at the balance sheet date.

Offsetting of financial assets and derivatives assets are as follows (in millions):

	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position				Net Amounts of Assets Presented in the Statement of Financial Position (1)
Derivatives accounted for as hedges:	2015	2014	2015		2014		2015	2014
Foreign exchange contracts	32	46	(13	)	(14	)	19	32

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(1) Included within Other current assets ($6 million in 2015 and $12 million in 2014, respectively) or Other non-current assets ($13 million in 2015 and $20 million in 2014, respectively)

Offsetting of financial liabilities and derivative liabilities are as follows (in millions):

	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Position				Net Amounts of Liabilities Presented in the Statement of Financial Position (2)
Derivatives accounted for as hedges:	2015	2014	2015		2014		2015	2014
Foreign exchange contracts	18	58	(13	)	(14	)	5	44

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(2) Included within Other current liabilities ($4 million in 2015 and $40 million in 2014, respectively) or Other non-current liabilities ($1 million in 2015 and $4 million in 2014, respectively)

The amounts of derivative gains (losses) recognized in the Consolidated Financial Statements are as follows (in millions):

Cash Flow Hedge - Foreign Exchange Contracts	Location of future reclassification from Accumulated Other Comprehensive Loss							Gain (Loss) Recognized in Accumulated Other Comprehensive Loss:
	Compensation and Benefits		Other General Expenses		Interest Expense	Other Income (Expense)		Total
2015	4		(3	)	—	(10	)	(9	)
2014	11		(3	)	—	(10	)	(2	)
2013	(17	)	—		—	13		(4	)

Cash Flow Hedge - Foreign Exchange Contracts
Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion):	Compensation and Benefits		Other General Expenses		Interest Expense		Other Income		Total
2015	4		(1	)	(9	)	(11	)	(17	)
2014	(5	)	3		(10	)	(2	)	(14	)
2013	(12	)	(9	)	(3	)	14		(10	)

The amount of gain (loss) recognized in the Consolidated Financial Statements is as follows (in millions):

	Twelve months ended December 31,
	Amount of Gain (Loss) Recognized in Income on Derivative (1)								Amount of Gain (Loss) Recognized in Income on Related Hedged Item
	2015		2014			2013			2015		2014		2013
Fair value hedges:
Foreign exchange contracts (2)	$	—	$	(9	)	$	(8	)	$	—	$	9	$	8

(1) Included in interest expense

(2) Relates to fixed rate debt

The Company estimates that approximately $7 million of pretax losses currently included within Accumulated other comprehensive loss will be reclassified into earnings in the next twelve months.

The amount of gain (loss) recognized in income on the ineffective portion of derivatives for 2015, 2014 and 2013 was not material.

The Company recorded a loss of $8 million, $18 million, and $18 million in Other income for foreign exchange derivatives not designated or qualifying as hedges for 2015, 2014, and 2013, respectively.