Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2022

Financial Assets and Liabilities Measured on Recurring Basis

The following table summarizes the valuation of the Company’s material financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021:

	September 30,
(IN MILLIONS)	2022		Level 1		Level 2		Level 3
Assets:
Plan assets for deferred compensation ⁽¹⁾	$	20	$	20	$	—	$	—
Investment in mutual funds ⁽²⁾		1		1		—		—
Interest rate swap arrangements ⁽⁴⁾
Other current assets		11		—		11		—
Warrant ⁽³⁾		1		—		—		1
Total	$	33	$	21	$	11	$	1
Liabilities:
Interest rate swap arrangements ⁽⁴⁾
Other current liabilities	$	1	$	—	$	1	$	—
Other non-current liabilities		—		—		—		—
Deferred compensation liabilities ⁽⁵⁾		20		20		—		—
Total	$	21	$	20	$	1	$	—

	December 31,
	2021		Level 1		Level 2		Level 3
Assets:
Plan assets for deferred compensation ⁽¹⁾		24		24		—		—
Investment in mutual funds ⁽²⁾		1		1		—		—
Warrant⁽³⁾		6		—		—		6
Total	$	31	$	25		—		6
Liabilities:
Interest rate swap arrangements ⁽⁴⁾
Other current liabilities	$	4	$	—	$	4	$	—
Other non-current liabilities		18		—		18		—
Deferred compensation liabilities ⁽⁵⁾		24		24		—		—
Total	$	46	$	24	$	22		—

(1)

Plan assets are comprised of investments in mutual funds, which are intended to fund liabilities arising from deferred compensation plans. These investments are carried at fair value, which is based on quoted market prices at period end in active markets. These investments are classified as equity securities with any gains or losses resulting from changes in fair value recorded in other income/(expense), net in the condensed consolidated statement of operations.

(2)	Investments in mutual funds are money-market accounts held with the intention of funding certain specific retirement plans.

(3)

The warrant to purchase equity interests in the company that, following the Connect Transaction, owns Global Connect, which was issued on March 5, 2021 in connection with the Connect Transaction (the “Connect Warrant”), was part of the proceeds related to the sale of Global Connect and included in the net gain on sale of Global Connect. The Connect Warrant is marked-to-market each reporting period with the subsequent change in fair value recorded to other income/(expense), net in the consolidated statement of operations. The Connect Warrant is reported within other non-current assets within the consolidated balance sheet. The fair value of the Connect Warrant asset is estimated using a Black-Scholes option-pricing model.

(4)	Derivative financial instruments include interest rate swap arrangements recorded at fair value based on externally-developed valuation models that use readily observable market parameters and the consideration of counterparty risk.

(5)

The Company offers certain employees the opportunity to participate in a deferred compensation plan. A participant’s deferrals are invested in a variety of participant directed stock and bond mutual funds and are classified as equity securities. Changes in the fair value of these securities are measured using quoted prices in active markets based on the market price per unit multiplied by the number of units held exclusive of any transaction costs. A corresponding adjustment for changes in fair value of the equity securities is also reflected in the changes in fair value of the deferred compensation obligation.

Summary of U.S Dollar Term Loan to Fixed Rate Outstanding Interest Rate Swaps

As of September 30, 2022, the Company had the following U.S. Dollar term loan floating-to-fixed rate outstanding interest rate swaps designated as hedges utilized in the management of its interest rate risk:

	Notional Amount	Maturity Date	Interest Rates
$	150,000,000	April 2023	2.26	%
$	250,000,000	May 2023	2.72	%
$	250,000,000	June 2023	2.07	%
$	150,000,000	July 2023	1.82	%

Schedule of Effect of Cash Flow Hedge Accounting on Condensed Consolidated Statement of Operations

The effect of cash flow hedge accounting on the condensed consolidated statement of operations for the three and nine months ended September 30, 2022 and 2021 respectively is as follows:

		Interest Expense			Interest Expense
		Three Months Ended September 30,			Nine Months Ended September 30,
(IN MILLIONS)		2022		2021	2022		2021
Interest expense, net (Location in the condensed consolidated statement of operations in which the effects of cash flow hedges are recorded)	$	70	$	68	$	203	$	217
Amount of loss reclassified from accumulated other comprehensive income into income, net of tax	$	—	$	6	$	7	$	15

Derivatives in Cash Flow Hedging Relationships

The pre-tax effect of derivative instruments in cash flow hedging relationships for the three months ended September 30, 2022 and 2021, respectively, was as follows:

Amount of (Gain)/Loss

Reclassified from AOCI

Recognized in OCI

Location of (Gain)/ Loss

into Income

(Effective Portion)

Reclassified from AOCI

(Effective Portion)

Derivatives in Cash Flow

Three Months Ended

into Income (Effective

Three Months Ended

Hedging Relationships

September 30,

Portion)

September 30,

(IN MILLIONS)

2022

2021

2022

2021

Interest rate swaps

)

Interest expense

The pre-tax effect of derivative instruments in cash flow hedging relationships for the nine months ended September 30, 2022 and 2021, respectively, was as follows:

Amount of (Gain)/Loss

Reclassified from AOCI

Recognized in OCI

Location of (Gain)/ Loss

into Income

(Effective Portion)

Reclassified from AOCI

(Effective Portion)

Derivatives in Cash Flow

Nine Months Ended

into Income (Effective

Nine Months Ended

Hedging Relationships

September 30,

Portion)

September 30,

(IN MILLIONS)

2022

2021

2022

2021

Interest rate swaps

(21

)

Interest expense

Nielsen Holdings plc 10-Q