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Risk Management
12 Months Ended
Dec. 31, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Risk Management
Risk Management
Foreign Currency Risk
The Company uses financial instruments to reduce its overall exposure to the effects of currency fluctuations on cash flows. The Company’s policy prohibits speculation in financial instruments for profit on exchange rate fluctuations, trading in currencies for which there are no underlying exposures, or entering into transactions for any currency to intentionally increase the underlying exposure. Instruments that are designated as part of a hedging relationship must be effective at reducing the risk associated with the exposure being hedged and are designated as part of a hedging relationship at the inception of the contract. Accordingly, changes in the market values of hedge instruments must be highly correlated with changes in market values of the underlying hedged items both at the inception of the hedge and over the life of the hedge contract.
The Company’s strategy related to foreign exchange exposure management is to offset the gains or losses on the financial instruments against gains or losses on the underlying operational cash flows or investments based on the Company's assessment of risk. The Company enters into derivative contracts for some of its non-functional currency cash, receivables, and payables, which are primarily denominated in major currencies that can be traded on open markets. The Company typically uses forward contracts and options to hedge these currency exposures. In addition, the Company has entered into derivative contracts for some forecasted transactions, which are designated as part of a hedging relationship if it is determined that the transaction qualifies for hedge accounting under the provisions of the authoritative accounting guidance for derivative instruments and hedging activities. A portion of the Company’s exposure is from currencies that are not traded in liquid markets and these are addressed, to the extent reasonably possible, by managing net asset positions, product pricing and component sourcing.
At December 31, 2016, the Company had outstanding foreign exchange contracts with notional amounts totaling $717 million, compared to $494 million outstanding at December 31, 2015. The Company does not believe these financial instruments should subject it to undue risk due to foreign exchange movements because gains and losses on these contracts should generally offset gains and losses on the underlying assets, liabilities and transactions.
The following table shows the Company's five largest net notional amounts of the positions to buy or sell foreign currency as of December 31, 2016 and the corresponding positions as of December 31, 2015:
 
Notional Amount
Net Buy (Sell) by Currency
2016
 
2015
British Pound
$
246

 
$
62

Euro
122

 
99

Chinese Renminbi
(108
)
 
(114
)
Brazilian Real
(56
)
 
(44
)
Australian Dollar
(51
)
 
(60
)

Interest Rate Risk
One of the Company’s European subsidiaries has Euro-denominated loans. The interest on the Euro-denominated loans is variable. The Company has interest rate swap agreements in place which change the characteristics of interest rate payments from variable to maximum fixed-rate payments. The interest rate swaps are not designated as a hedge. As such, the changes in the fair value of the interest rate swaps are included in Other income (expense) in the Company’s consolidated statements of operations. The fair value of the interest rate swaps liability was de minimus at December 31, 2016 and a liability position of $1 million at December 31, 2015.
 Counterparty Risk
The use of derivative financial instruments exposes the Company to counterparty credit risk in the event of non-performance by counterparties. However, the Company’s risk is limited to the fair value of the instruments when the derivative is in an asset position. The Company actively monitors its exposure to credit risk. As of December 31, 2016, all of the counterparties have investment grade credit ratings. As of December 31, 2016, the net aggregate credit risk with all counterparties was approximately $9 million.
Derivative Financial Instruments
The following tables summarize the fair values and location in the consolidated balance sheets of all derivative financial instruments held by the Company at December 31, 2016 and 2015
 
Fair Values of Derivative Instruments
 
Assets
 
Liabilities
December 31, 2016
Fair
Value
 
Balance
Sheet
Location
 
Fair
Value
 
Balance
Sheet
Location
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
Foreign exchange contracts
$
9

 
Other assets
 
$
32

 
Accrued liabilities
Total derivatives
$
9

 
 
 
$
32

 
 
 
 
Fair Values of Derivative Instruments
 
Assets
 
Liabilities
December 31, 2015
Fair
Value
 
Balance
Sheet
Location
 
Fair
Value
 
Balance
Sheet
Location
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
Foreign exchange contracts
$
6

 
Other assets
 
$
2

 
Accrued liabilities
Interest rate swap

 
Other assets
 
1

 
Accrued liabilities
Total derivatives
$
6

 
 
 
$
3

 
 

The following table summarizes the effect of derivative instruments in the Company's consolidated statements of operations, including immaterial amounts related to discontinued operations, for the years ended December 31, 2016, 2015 and 2014
 
December 31
Statement of
Operations Location
Gain (Loss) on Derivative Instruments
2016
 
2015
 
2014
Interest rate swap
$
1

 
$
1

 
$
1

Other income (expense)
Foreign exchange contracts
(57
)
 
6

 
(5
)
Other income (expense)
Total derivatives
$
(56
)
 
$
7

 
$
(4
)
 

The Company had no instruments designated as hedging instruments for the year ended December 31, 2016.