Derivative Financial Instruments

12 Months Ended

Dec. 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 used interest rate swaps to mitigate its exposure to interest rate fluctuations on interest payments related to variable rate debt. The Company is no longer invested in interest rate swaps. The Company's interest rate contracts were used in a non-qualifying hedging relationship.

• Floating to fixed interest rate collar contracts: The Company uses interest rate collar contracts to mitigate its exposure to interest rate fluctuations on interest payments related to variable rate debt. No payments or receipts are exchanged on interest rate collar contracts unless interest rates rise or fall to exceed a predetermined ceiling or floor rate. The Company uses these contracts in a qualifying hedging relationship.

• 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 December 31,
	2016						2015
(in millions)	Notional Currency	Notional Value	Assets (a)		Liabilities (a)		Notional Currency	Notional Value	Assets (a)		Liabilities (a)
Derivatives designated as hedges of net investments in foreign operations:
Foreign exchange contracts (b)	AUD	211	$	57	$	—	AUD	260	$	65	$	—
Foreign exchange contracts (c)	EUR	—	—		—		EUR	200	51		—
Foreign exchange contracts (d)	GBP	300	78		—		GBP	250	39		—
Foreign exchange contracts (e)	CAD	130	9		—		CAD	110	24		—
			144		—				179		—
Derivatives designated as cash flow hedges:
Interest rate collar contracts (f)	USD	3,000	3		—		USD	—	—		—
Derivatives not designated as hedging instruments:
Interest rate contracts (g)	USD	—	—		—		USD	5,000	—		(56		)
			$	147	$	—			$	179	$	(56	)

(a) Of the balances included in the table above, in aggregate, $147 million of assets as of December 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) In connection with the divestiture of the Company's Australian ATM business, the Company settled notional value 49 million AUD in October 2016 at a net settlement value of $8 million. Refer to note 16 "Supplemental Financial Information" for additional details on the divestiture of the Company's Australian ATM business.

(c) Matured in January 2016 at a net settlement value of $49 million.

(d) Notional value 100 million GBP matured in August 2016 at a net settlement value of $25 million. The Company entered into a new foreign exchange contract with a notional value of 150 million GBP.

(e) Notional value 75 million CAD matured in August 2016 at a net settlement value of $14 million. The Company entered into a new foreign exchange contract with a notional value of 95 million CAD.

(f) Subsequent to December 31, 2016, the Company entered into notional value 1.3 billion USD interest rate collar contracts.

(g) Matured in September 2016.

The maximum length of time over which the Company is hedging its currency exposure of net investments in foreign operations is through August 2019.

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

Effect of Derivative Instruments on the Consolidated Financial Statements

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

	Year ended December 31,
	2016					2015					2014
(in millions, pretax)	Interest Rate Contracts			Foreign Exchange Contracts		Interest Rate Contracts			Foreign Exchange Contracts		Interest Rate Contracts			Foreign Exchange Contracts
Derivatives designated as hedging instruments:
Gain recognized in "Foreign currency translation adjustment" in the consolidated statements of comprehensive income (loss) (effective portion)	$	—		$	58	$	—		$	79	$	—		$	80
Gain recognized in "Derivative instruments" in the consolidated statements of comprehensive income (loss) (effective portion) (a)	3			—		—			—		—			—
Derivatives not designated as hedging instruments:
(Loss) gain recognized in "Other income" in the consolidated statements of operations	$	(5	)	$	—	$	(19	)	$	2	$	(4	)	$	4

(a) Interest rate collar contracts.

Accumulated Derivative Gains and Losses

The following table summarizes activity in other comprehensive income for the years ended December 31, 2016, 2015, and 2014 related to derivative instruments classified as cash flow hedges and net investment hedges held by the Company:

	Year ended December 31,
(in millions, after tax)	2016		2015		2014
Accumulated gain (loss) included in other comprehensive income (loss) at beginning of the period	$	86	$	37	$	(12	)
Increase in fair value of derivatives that qualify for hedge accounting, net of tax (a) (b)	38		49		49
Accumulated gain included in other comprehensive income at end of the period	$	124	$	86	$	37

(a) Gains are included in "Derivative instruments" and “Foreign currency translation adjustment” on the consolidated statements of comprehensive income (loss).

(b) Net of $23 million, $30 million, and $31 million of tax for the years ended December 31, 2016, 2015, and 2014, respectively.