Fair Value of Assets and Liabilities

9 Months Ended

Sep. 30, 2025

12. FAIR VALUE OF ASSETS AND LIABILITIES

Assets and liabilities recorded at fair value on a recurring basis as of September 30, 2025 and December 31, 2024 were as follows:


		September 30, 2025
In millions	Location within the Condensed Consolidated Balance Sheets	Total		Level 1		Level 2		Level 3
Assets:




Debt securities	Other assets	$	11	$	—	$	11	$	—
Total assets		$	11	$	—	$	11	$	—

Liabilities:
Foreign exchange contracts	Other current liabilities	$	1	$	—	$	1	$	—
Interest rate swap contracts	Other current liabilities / Other liabilities	28		—		28		—
Total liabilities		$	29	$	—	$	29	$	—


		December 31, 2024
In millions	Location within the Condensed Consolidated Balance Sheets	Total		Level 1		Level 2		Level 3
Assets:

Foreign exchange contracts	Other current assets	$	1	$	—	$	1	$	—
Interest rate swap contracts	Other current assets / Other assets	12		—		12		—
Debt securities	Other assets	6		—		6		—
Total assets		$	19	$	—	$	19	$	—

Liabilities:
Interest rate swap contracts	Other current liabilities / Other liabilities	$	17	$	—	$	17	$	—
Total liabilities		$	17	$	—	$	17	$	—

Foreign exchange contracts are valued using the market approach based on observable market transactions of forward rates and are classified within Level 2 of the valuation hierarchy.

Interest rate swap contracts are valued using an income model based on disparity between variable and fixed interest rates, the scheduled balance of underlying principal outstanding, yield curves, and other information readily available in the market. As such, the interest rate swap contracts are classified in Level 2 of the fair value hierarchy.

We incorporate credit valuation adjustments in our fair value measurements to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we consider the impact of netting and any applicable credit enhancements. We measure the credit risk of our derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments utilize Level 3 inputs to evaluate the likelihood of both our own default and counterparty default. As of September 30, 2025, we determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives, and therefore the valuations are classified in Level 2 of the fair value hierarchy.

Our available for sale debt securities represent convertible notes issued by a Canadian corporation in which we have an equity investment. The debt securities are valued using a binomial lattice model based on factors such as stock price of the issuer, principal outstanding, coupon rate, volatility, credit spread, risk-free rate and other market data. As such, the debt securities are classified in Level 2 of the fair value hierarchy. The associated unrealized gains recorded in AOCI are not material.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

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+ Details

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