Derivative Financial Instruments

3 Months Ended

Mar. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

The Company enters into the following types of derivatives:

• Floating to fixed interest rate swaps: The Company uses interest rate swaps to mitigate its exposure to interest rate fluctuations on interest payments related to variable rate debt. The Company uses these contracts in non-qualifying hedging relationships.

• Foreign exchange contracts: The Company uses cross-currency swaps to protect the net investment in certain foreign subsidiaries and/or affiliates with respect to changes in foreign currency exchange rates. The Company uses these contracts in both qualifying and non-qualifying hedging relationships.

The Company held the following derivative instruments as of the dates indicated:

		As of March 31, 2016						As of December 31, 2015
(in millions)	Notional Currency	Notional Value	Assets (a)		Liabilities (a)			Notional Value	Assets (a)		Liabilities (a)
Derivatives designated as hedges of net investments in foreign operations:
Foreign exchange contracts	AUD	260	$	55	$	—		260	$	65	$	—
Foreign exchange contracts (b)	EUR	—	—		—			200	51		—
Foreign exchange contracts	GBP	250	49		—			250	39		—
Foreign exchange contracts	CAD	110	19		—			110	24		—
			123		—				179		—
Derivatives not designated as hedging instruments:
Interest rate contracts	USD	5,000	—		(41		)	5,000	—		(56		)
			$	123	$	(41	)		$	179	$	(56	)

(a) Of the balances included in the table above, in aggregate, $123 million of assets and $38 million of liabilities, net $85 million, as of March 31, 2016 and $179 million of assets and $51 million of liabilities, net $128 million, as of December 31, 2015 are subject to master netting agreements to the extent that the swaps are with the same counterparty. The terms of those agreements require that the Company net settle the outstanding positions at the option of the counterparty upon certain events of default.

(b) The forward exchange contracts matured in January 2016 at a net settlement value of $49 million.

The maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for forecasted transactions excluding those forecasted transactions related to the payment of variable interest on existing financial instruments is through January 2018.

Fair Value Measurement

The carrying amounts for the Company's derivative financial instruments are the estimated fair value of the financial instruments. The Company’s derivatives are not exchange listed and therefore the fair value is estimated under an income approach using Bloomberg analytics models that are based on readily observable market inputs. These models reflect the contractual terms of the derivatives, such as notional value and expiration date, as well as market-based observables including interest and foreign currency exchange rates, yield curves, and the credit quality of the counterparties. The models also incorporate the Company’s creditworthiness in order to appropriately reflect non-performance risk. Inputs to the derivative pricing models are generally observable and do not contain a high level of subjectivity and, accordingly, the Company’s derivatives are classified within Level 2 of the fair value hierarchy. While the Company believes its estimates result in a reasonable reflection of the fair value of these instruments, the estimated values may not be representative of actual values that could have been realized or that will be realized in the near future.

Effect of Derivative Instruments on the Unaudited Consolidated Financial Statements

Derivative gains and (losses) were as follows for the periods indicated:

	Three months ended March 31,
	2016						2015
(in millions, pretax)	Interest Rate Contracts			Foreign Exchange Contracts			Interest Rate Contracts			Foreign Exchange Contracts
Derivatives in net investment hedging relationships:
Gain (loss) recognized in Foreign currency translation adjustment in the consolidated statements of comprehensive income (loss) (effective portion)	$	—		$	(8	)	$	—		$	67
Derivatives not designated as hedging instruments:
Gain (loss) recognized in Other income in the consolidated statements of operations	(4		)	—			(5		)	3

Accumulated Derivative Gains and Losses

The following table summarizes activity in other comprehensive income related to derivative instruments classified as cash flow hedges and a net investment hedge held by the Company for the periods presented:

(in millions, after tax)	Three months ended March 31,
	2016			2015
Accumulated gain included in other comprehensive income (loss) at beginning of the period	$	86		$	37
Increase (decrease) in fair value of derivatives that qualify for hedge accounting, net of tax (a)	(5		)	42
Accumulated gain included in other comprehensive income (loss) at end of the period	$	81		$	79

(a) Gains and (losses) are included in “Foreign currency translation adjustment” in the unaudited consolidated statements of comprehensive income (loss).