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DERIVATIVES AND HEDGING INSTRUMENTS
 12 Months Ended
Dec. 31, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVES AND HEDGING INSTRUMENTS
14. DERIVATIVES AND HEDGING INSTRUMENTS

NCR is exposed to certain risks arising from both our business operations and economic conditions. We principally manage exposures to a wide variety of business and operational risk through management of core business activities. We manage interest rate risk associated with our vault cash rental obligations and floating rate-debt by managing the amount, sources, and duration of debt funding and the use of derivative financial instruments. The Company uses interest rate cap agreements or interest rate swap contracts (“Interest Rate Derivatives”) to manage differences in the amount, timing and duration of known or expected cash payments related to our existing TLA Facility and vault cash agreements.

Further, a substantial portion of our operations and revenue occur outside the United States and, as such, NCR has exposure to approximately 45 functional currencies. Our results can be significantly impacted, both positively and negatively, by changes in foreign currency exchange rates. The Company seeks to mitigate such impact by hedging its foreign currency transaction exposure using foreign currency forward and option contracts. We do not enter into hedges for speculative purposes.

Foreign Currency Exchange Risk The accounting guidance for derivatives and hedging requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the Consolidated Balance Sheets. The Company designates foreign exchange contracts as cash flow hedges of forecasted transactions when they are determined to be highly effective at inception.

Our risk management strategy includes hedging, on behalf of certain subsidiaries, a portion of our forecasted, non-functional currency denominated cash flows for a period of up to 15 months. As a result, some of the impact of currency fluctuations on non-functional currency denominated transactions (and hence on subsidiary operating income, as stated in the functional currency), is mitigated in the near term. In the longer term (greater than 15 months), the subsidiaries are still subject to the effect of translating the functional currency results to United States Dollars. To manage our exposures and mitigate the impact of currency fluctuations on the operations of our foreign subsidiaries, we hedge our main transactional exposures through the use of foreign exchange forward and option contracts. This is primarily done through the hedging of foreign currency denominated inter-company inventory purchases by NCR’s marketing units and the foreign currency denominated inputs to our manufacturing units. If the hedge is designated as a highly effective cash flow hedge, the gains or losses are deferred into accumulated other comprehensive income (“AOCI”). The gains or losses from derivative contracts that are designated as highly effective cash flow hedges related to inventory purchases are recorded in cost of products when the inventory is sold to an unrelated third party. Otherwise, they are recorded in earnings when the exchange rates change. As of December 31, 2022, the balance in AOCI related to foreign exchange derivative transactions was zero.

We also utilize foreign exchange contracts to hedge our exposure of assets and liabilities denominated in non-functional currencies. We recognize the gains and losses on these types of hedges in earnings as exchange rates change.

Interest Rate Risk The Company designates Interest Rate Derivative contracts as cash flow hedges of forecasted transactions when they are determined to be highly effective at inception.

We utilize interest rate swap contracts or interest rate cap agreements to add stability to interest cost and to manage exposure to interest rate movements as part of our interest rate risk management strategy. Payments and receipts related to Interest Rate Derivatives are included in cash flows from operating activities in the Consolidated Statements of Cash Flows.
In January 2022, the Company executed a $250 million notional amount interest rate swap contract originally terminating on January 1, 2025. The interest rate swap contract had a fixed rate of 1.43% and was designated as a cash flow hedge of floating interest rate cost associated with the Company's U.S. Dollar vault cash agreements.

In March 2022, the Company terminated the outstanding $2 billion notional amount interest rate cap agreements maturing in 2024 for proceeds of $64 million. The gains will be recognized ratably through July 1, 2024, corresponding to the term of the original interest rate cap agreements.

In March 2022, the Company executed $2.2 billion aggregate notional amount interest rate swap contracts that began April 1, 2022 and had an original termination date of April 1, 2025. These interest rate swap contracts had fixed rates ranging from 2.078% to 2.443%, and were designated as cash flow hedges of the floating rate interest associated with the Company’s U.S. Dollar and U.K. Pound Sterling vault cash agreements and TLA Facility.

In June 2022, the Company terminated the outstanding $2.4 billion aggregate notional interest rate swap contracts maturing in 2025 for proceeds of $55 million. The gains will be recognized ratably primarily through April 1, 2025, corresponding to the term of the original interest rate swap agreements.

In June 2022, the Company executed $2.4 billion aggregate notional amount interest rate swap contracts effective June 1, 2022 and terminating on April 1, 2025. These interest rate swap contracts have fixed rates ranging from 2.790% to 3.251%, and have been designated as cash flow hedges of the floating rate interest associated with the Company's U.S. Dollar and U.K. Pound Sterling vault cash agreements.

At December 31, 2022, each of our outstanding Interest Rate Derivative agreements were determined to be highly effective. Amounts reported in Accumulated other comprehensive income related to these derivatives will be reclassified to Cost of services as payments are made on the Company’s vault cash rental obligations. Unrealized gains on terminated interest rate swap and cap agreements reported in Accumulated other comprehensive income will be reclassified to Interest expense and Cost of services ratably over terms corresponding to the original agreements, as described above. As of December 31, 2022 and December 31, 2021, the balance in AOCI related to Interest Rate Derivatives was $109 million and $8 million, respectively.
The following tables provide information on the location and amounts of derivative fair values in the Consolidated Balance Sheets:
Fair Values of Derivative Instruments
December 31, 2022
In millions
Balance Sheet
Location
Notional
Amount		Fair
Value
Balance Sheet
Location
Notional
Amount		Fair
Value
Derivatives designated as hedging instruments
Interest rate swap contractsPrepaid and other current assets$36 Other current liabilities$— 
Interest rate swap contractsOther assets27 Other liabilities
Total derivatives designated as hedging instruments$2,423$63 $— $— 
Derivatives not designated as hedging instruments
Foreign exchange contractsPrepaid and other current assets$1 Other current liabilities$(2)
Total derivatives not designated as hedging instruments$376 $1 $373 $(2)
Total derivatives$64 $(2)
 Fair Values of Derivative Instruments
 December 31, 2021
In millions
Balance Sheet
Location
Notional
Amount		Fair
Value
Balance Sheet
Location
Notional
Amount		Fair
Value
Derivatives designated as hedging instruments
Interest rate contractsOther assets$18 Other liabilities$— 
Total derivatives designated as hedging instruments$2,000 $18 $— $— 
Derivatives not designated as hedging instruments
Foreign exchange contractsPrepaid and other current assets$1 Other current liabilities$1 
Total derivatives not designated as hedging instruments$278 $1 $396 $1 
Total derivatives$19 $1 
The effects of derivative instruments on the Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income for the years ended December 31, 2022, 2021, and 2020 were as follows:
In millionsAmount of Gain (Loss) Recognized in Other Comprehensive Income (OCI) on DerivativeAmount of (Gain) Loss Reclassified from AOCI into the Consolidated Statements of Operations
Derivatives in Cash Flow Hedging RelationshipsFor the year ended December 31, 2022For the year ended December 31, 2021For the year ended December 31, 2020Location of (Gain) Loss Reclassified from AOCI into the Consolidated Statements of OperationsFor the year ended December 31, 2022For the year ended December 31, 2021For the year ended December 31, 2020
Interest rate contracts$116 $5 $— Cost of services$(8)$1 $— 
Interest rate contracts$36 $4 $— Interest expense$(10)$— $— 
Foreign exchange contracts$— $— $(8)Cost of products$— $— $7 
In millions Amount of Gain (Loss) Recognized in the Consolidated Statements of Operations
Derivatives not Designated as Hedging InstrumentsLocation of Gain (Loss) Recognized in the Consolidated Statements of OperationsFor the year ended December 31, 2022For the year ended December 31, 2021For the year ended December 31, 2020
Foreign exchange contractsOther income (expense), net$(31)$(24)$22 

The following tables show the impact of the Company's cash flow hedge accounting relationships on the Consolidated Statement of Operations for the years ended December 31, 2022, 2021, and 2020.
Location and Amount of (Gain) Loss Recognized in Income on Cash Flow Hedging Relationships for the years ended December 31:
In millionsCost of ServicesCost of ProductsInterest Expense
202220212020202220212020202220212020
Total amount of expense presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded$3,889 $3,413 $2,950 $2,097 $1,850 $1,733 $285 $238 $218 
Amount of (gain) loss reclassified from Accumulated other comprehensive loss, net of expense$(8)$1 $— $— $— $7 $(10)$— $— 

As of December 31, 2022 the Company expects to reclassify $45 million of net derivative-related gains contained in Accumulated other comprehensive loss into earnings during the next twelve months.
Refer to Note 15, “Fair Value of Assets and Liabilities”, for further information on derivative assets and liabilities recorded at fair value on a recurring basis.
Concentration of Credit Risk
NCR is potentially subject to concentrations of credit risk on accounts receivable and financial instruments such as hedging instruments and cash and cash equivalents. Credit risk includes the risk of nonperformance by counterparties. The maximum potential loss may exceed the amount recognized on the Consolidated Balance Sheets. Exposure to credit risk is managed through credit approvals, credit limits, selecting major international financial institutions as counterparties to hedging transactions and monitoring procedures. NCR’s business often involves large transactions with customers, and if one or more of those customers were to default on its obligations under applicable contractual arrangements, the Company could be exposed to potentially significant losses. However, management believes that the reserves for potential losses are adequate. As of December 31, 2022 and 2021, NCR did not have any major concentration of credit risk related to financial instruments.