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Risk Management
12 Months Ended
Dec. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Risk Management Risk Management
Foreign Currency Risk
At December 31, 2019, the Company had outstanding foreign exchange contracts with notional amounts totaling $1.1 billion, compared to $819 million outstanding at December 31, 2018. 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, 2019 and the corresponding positions as of December 31, 2018:
 
Notional Amount
Net Buy (Sell) by Currency
2019
 
2018
Euro
$
134

 
$
89

British pound
107

 
139

Australian dollar
(123
)
 
(105
)
Chinese renminbi
(79
)
 
(55
)
Brazilian real
(47
)
 
(41
)

Net Investment Hedges
The Company uses foreign exchange forward contracts with contract terms of 12 to 15 months to hedge against the effect of the British pound and the Euro exchange rate fluctuations against the U.S. dollar on a portion of its net investment in certain European operations. The Company recognizes changes in the fair value of the net investment hedges as a component of foreign currency translation adjustments within other comprehensive income to offset a portion of the change in translated value of the net investment being hedged, until the investment is sold or liquidated. The Company has elected to exclude the difference between the spot rate and the forward rate of the forward contract from its assessment of hedge effectiveness. The
effect of the excluded components will be amortized on a straight-line basis and recognized through interest expense. As of December 31, 2019, the Company had €94 million of net investment hedges in certain Euro functional subsidiaries and £100 million of net investment hedges in certain British pound functional subsidiaries. During the year ended December 31, 2019, the Company amortized $6 million of income from the excluded components through interest expense.
 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, 2019, all of the counterparties have investment grade credit ratings. As of December 31, 2019, the credit risk with all counterparties was approximately $4 million.
Derivative Financial Instruments
The following tables summarize the fair values and location in the Consolidated Balance Sheet of all derivative financial instruments held by the Company at December 31, 2019 and 2018
 
Fair Values of Derivative Instruments
 
Assets
 
Liabilities
December 31, 2019
Fair
Value
 
Balance
Sheet
Location
 
Fair
Value
 
Balance
Sheet
Location
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
Foreign exchange contracts
$
3

 
Other assets
 
$

 
Accrued liabilities
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
Foreign exchange contracts
$
1

 
Other assets
 
$
5

 
Accrued liabilities
 
 
Fair Values of Derivative Instruments
 
Assets
 
Liabilities
December 31, 2018
Fair
Value
 
Balance
Sheet
Location
 
Fair
Value
 
Balance
Sheet
Location
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
Foreign exchange contracts
$
5

 
Other assets
 
$
4

 
Accrued liabilities

The following table summarizes the effect of derivatives designated as hedging instruments, for the years ended December 31, 2019, 2018 and 2017
 
December 31
Financial Statement Location
Gain (Loss) on Derivative Instruments
2019
 
2018
 
2017
Foreign exchange contracts
$
8

 
$

 
$
(3
)
Other comprehensive income (loss)
The following table summarizes the effect of derivatives not designated as hedging instruments, for the years ended December 31, 2019, 2018 and 2017
 
December 31
Financial Statement Location
Gain (Loss) on Derivative Instruments
2019
 
2018
 
2017
Foreign exchange contracts
(8
)
 
(14
)
 
15

Other income (expense)