For accounts receivable originated in Japan, we have entered into agreements with financial institutions in which the entire interest in and ownership of the receivable is sold. We continue to service the receivables in this arrangement. Servicing assets or liabilities are not recognized because we receive adequate compensation to service the sold receivables. The Japanese arrangement includes limited recourse provisions, which are not material.


as of and for the years ended December 31 (in millions)	2022		2021		2020
Sold receivables at beginning of year	$	81	$	96	$	79
Proceeds from sales of receivables	291		339		348
Cash collections (remitted to the owners of the receivables)	(293)		(346)		(335)
Effect of foreign exchange rate changes	(8)		(8)		4
Sold receivables at end of year	$	71	$	81	$	96

We invest excess cash in certificates of deposit or money market or other funds and diversify the concentration of cash among different financial institutions. With respect to financial instruments, where appropriate, we have diversified our selection of counterparties, and have arranged collateralization and master-netting agreements to minimize the risk of loss.

Global economic conditions and liquidity issues in certain countries have resulted, and may continue to result, in delays in the collection of receivables and credit losses. Global economic conditions, governmental actions and customer-specific factors may require us to re-evaluate the collectability of our receivables and we could potentially incur additional credit losses. These conditions may also impact the stability of the Euro.

We operate on a global basis and are exposed to the risk that our earnings, cash flows and equity could be adversely impacted by fluctuations in foreign exchange and interest rates. Our hedging policy attempts to manage these risks to an acceptable level based on our judgment of the appropriate trade-off between risk, opportunity and costs.

We are primarily exposed to foreign exchange risk with respect to recognized assets and liabilities, forecasted transactions and net assets denominated in the Euro, British Pound, Chinese Renminbi, Korean Won, Australian Dollar, Canadian Dollar, Japanese Yen, Colombian Peso, Brazilian Real, Mexican Peso, Turkish Lira, Indian Rupee and Swedish Krona. We manage our foreign currency exposures on a consolidated basis, which allows us to net exposures and take advantage of any natural offsets. In addition, we use derivative and nonderivative instruments to further reduce the net exposure to foreign exchange risk. Gains and losses on the hedging instruments offset losses and gains on the hedged transactions and reduce the earnings and equity volatility resulting from changes in foreign exchange rates. Financial market and currency volatility may limit our ability to cost-effectively hedge these exposures.

We are also exposed to the risk that our earnings and cash flows could be adversely impacted by fluctuations in interest rates. Our policy is to manage interest costs using the mix of fixed- and floating-rate debt that we believe is appropriate at that time. To manage this mix in a cost-efficient manner, we periodically enter into interest rate swaps

We may use options, including collars and purchased options, forwards and cross-currency swaps to hedge the foreign exchange risk to earnings relating to forecasted transactions and recognized assets and liabilities. We periodically use treasury rate locks to hedge the risk to earnings associated with movements in interest rates relating to anticipated issuances of debt.

The notional amounts of foreign exchange contracts designated as cash flow hedges were $398 million and $377 million as of December 31, 2022 and 2021, respectively. The maximum term over which we have cash flow hedge contracts in place related to forecasted transactions at December 31, 2022 is 12 months for foreign exchange contracts. There were no outstanding interest rate contracts designated as cash flow hedges as of December 31, 2022 and 2021.

We periodically use interest rate swaps to convert a portion of our fixed-rate debt into variable-rate debt. These instruments hedge our earnings from changes in the fair value of debt due to fluctuations in the designated benchmark interest rate.

In May 2017, we issued €600 million of 1.3% senior notes due May 2025. In May 2019, we issued €750 million of 0.40% senior notes due May 2024 and €750 million of 1.3% senior notes due May 2029. We have designated these debt obligations as hedges of our net investment in our European operations and, as a result, mark to spot rate adjustments of the outstanding debt balances are recorded as a component of AOCI. As of December 31, 2022, we had an accumulated pre-tax unrealized translation gain in AOCI of $95 million related to the Euro-denominated senior notes.

If it is determined that a derivative or nonderivative hedging instrument is no longer highly effective as a hedge, we discontinue hedge accounting prospectively. Gains or losses relating to terminations of effective cash flow hedges generally continue to be deferred and are recognized consistent with the loss or income recognition of the underlying hedged items. However, if it is probable that hedged forecasted transactions will not occur, any gains or losses would be immediately reclassified from AOCI to earnings. There were no cash flow hedge dedesignations in 2022, 2021 or 2020 resulting from changes in our assessment of the probability that the hedged forecasted transactions would occur. In 2020, we terminated interest rate contracts with a notional amount of $550 million for $173 million in cash payments. The losses relating to these terminations continue to be deferred and are being recognized consistent with the underlying hedged item, interest expense on the issuance of debt.

If we terminate a fair value hedge, an amount equal to the cumulative fair value adjustment to the hedged item at the date of termination is amortized to earnings over the remaining term of the hedged item. There were no fair value hedges terminated in 2022, 2021 or 2020.

If we remove a net investment hedge designation, any gain or loss recognized in AOCI is not reclassified to earnings until we sell, liquidate, or deconsolidate the foreign investments that were being hedged. There were no net investment hedges terminated in 2022, 2021 or 2020.

We use forward contracts to hedge earnings from the effects of foreign exchange relating to certain of our intra-company and third-party receivables and payables denominated in a foreign currency. These derivative instruments are generally not formally designated as hedges and the terms of these instruments generally do not exceed one month.

The following tables summarize the gains and losses on our hedging instruments and the classification of those gains and losses within our consolidated financial statements for the years ended December 31, 2022, 2021 and 2020.


(in millions)	Gain (loss) recognized in OCI						Location of gain (loss) in income statement	Gain (loss) reclassified from AOCI into income
	2022		2021		2020			2022		2021		2020
Cash flow hedges
Interest rate contracts	$	—	$	—	$	(131)	Interest expense, net	$	(6)	$	(6)	$	(1)
Foreign exchange contracts	28		5		(21)		Cost of sales	26		(23)		(5)
Net investment hedges	141		200		(224)		Other (income) expense, net	—		—		—
Total	$	169	$	205	$	(376)		$	20	$	(29)	$	(6)


	Location of gain (loss) in income statement	Gain (loss) recognized in income
(in millions)		2022		2021		2020


Undesignated derivative instruments
Foreign exchange contracts	Other (income) expense, net	$	(30)	$	(36)	$	49

The following table summarizes net-of-tax activity in AOCI, a component of stockholders’ equity, related to our cash flow hedges.


as of and for the year ended December 31 (in millions)	2022		2021		2020
Accumulated other comprehensive income (loss) balance at beginning of year	$	(126)	$	(153)	$	(41)

(Loss) gain in fair value of derivatives during the year	22		4		(117)
Amount reclassified to earnings during the year	(15)		23		5
Accumulated other comprehensive income (loss) balance at end of year	$	(119)	$	(126)	$	(153)

As of December 31, 2022, less than $1 million of deferred, net after-tax gains on derivative instruments included in AOCI are expected to be recognized in earnings during the next 12 months, coinciding with when the hedged items are expected to impact earnings.

The following table summarizes the classification and fair values of derivative instruments reported in the consolidated balance sheet as of December 31, 2022.


	Derivatives in asset positions			Derivatives in liability positions
(in millions)	Balance sheet location	Fair value		Balance sheet location	Fair value
Derivative instruments designated as hedges

Foreign exchange contracts	Prepaid expenses and other current assets	$	8	Accrued expenses and other current liabilities	$	5

Total derivative instruments designated as hedges		8			5
Undesignated derivative instruments
Foreign exchange contracts	Prepaid expenses and other current assets	6		Accrued expenses and other current liabilities	7
Total derivative instruments		$	14		$	12

The following table summarizes the classification and fair values of derivative instruments reported in the consolidated balance sheet as of December 31, 2021.


	Derivatives in asset positions			Derivatives in liability positions
(in millions)	Balance sheet location	Fair value		Balance sheet location	Fair value
Derivative instruments designated as hedges

Foreign exchange contracts	Prepaid expenses and other current assets	$	6	Accrued expenses and other current liabilities	$	3

Total derivative instruments designated as hedges		6			3
Undesignated derivative instruments
Foreign exchange contracts	Prepaid expenses and other current assets	2		Accrued expenses and other current liabilities	2
Total derivative instruments		$	8		$	5

While some of our derivatives are subject to master netting arrangements, we present our assets and liabilities related to derivative instruments on a gross basis within the consolidated balance sheets. Additionally, we are not required to post collateral for any of our outstanding derivatives.

The following table provides information on our derivative positions as if they were presented on a net basis, allowing for the right of offset by counterparty.


	December 31, 2022				December 31, 2021
(in millions)	Asset		Liability		Asset		Liability
Gross amounts recognized in the consolidated balance sheets	$	14	$	12	$	8	$	5
Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheets	(4)		(4)		(2)		(2)
Total	$	10	$	8	$	6	$	3

The following table presents the amounts recorded on the consolidated balance sheets related to fair value hedges:


	Carrying amount of hedged items				Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged items (a)
(in millions)	Balance as of December 31, 2022		Balance as of December 31, 2021		Balance as of December 31, 2022		Balance as of December 31, 2021
Long-term debt	$	101	$	101	$	4	$	4