Derivative liability, balance

[Table of Contents](#ic0c31f79a13347b4b84027caf6ad2450_7)Derivatives and HedgingWe are exposed to various risks arising from business operations and market conditions, including fluctuations in interest rates and certain foreign currencies. When deemed appropriate, we use derivative and non-derivative instruments as risk management tools to mitigate the potential impact of interest rate and foreign exchange rate risks. The objective of using these tools is to reduce fluctuations in our earnings and cash flows associated with changes in these rates. Derivative instruments are recognized in the condensed consolidated balance sheets at fair value and are designated as Level 2 in the fair value hierarchy. They are valued using inputs other than quoted prices, such as foreign exchange rates and yield curves.The following table summarizes the classification and carrying amounts of derivative instruments and the foreign currency denominated debt, a non-derivative financial instrument, that are designated and qualify as part of hedging relationships (in thousands):

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|  |  |  |  | September 30, 2022 |  | December 31, 2021 |
| Instrument |  | Balance Sheet Classification |  | Notional |  | Balance |  | Notional |  | Balance |
| Net investment hedges: |  |  |  |  |  |  |  |  |  |  |
| Forward contracts |  | Prepaid expenses and other current assets |  | $ | 1,513,750 |  | $ | 261,813 |  | $ | 925,810 |  | $ | 73,819 |
| Forward contract |  | Other current liabilities |  | $ | — |  | $ | — |  | $ | 235,180 |  | $ | 2,935 |
| Foreign currency debt  |  | Long-term debt |  | € | 700,000 |  | $ | 686,980 |  | € | 700,000 |  | $ | 792,820 |

The tables below present gains related to designated net investment hedges:

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|  |  | Gain Recognized in AOCL before Reclassifications |  | Gain Recognized in Interest Expense for Excluded Components |
| (in thousands) |  | 2022 |  | 2021 |  | 2022 |  | 2021 |
| Three months ended September 30, |  |  |  |  |  |  |  |  |
| Forward contracts |  | $ | 81,454  |  |  | $ | 20,958  |  |  | $ | 7,965  |  |  | $ | 6,574  |  |
| Foreign currency debt  |  | 43,890  |  |  | 21,000  |  |  | —  |  |  | —  |  |
| Total |  | $ | 125,344  |  |  | $ | 41,958  |  |  | $ | 7,965  |  |  | $ | 6,574  |  |



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|  |  | Gain Recognized in AOCL before Reclassifications |  | Gain Recognized in Interest Expense for Excluded Components |
| (in thousands) |  | 2022 |  | 2021 |  | 2022 |  | 2021 |
| Nine months ended September 30, |  |  |  |  |  |  |  |  |
| Forward contracts |  | $ | 167,834  |  |  | $ | 45,143  |  |  | $ | 23,095  |  |  | $ | 19,722  |  |
| Foreign currency debt  |  | 105,840  |  |  | 49,280  |  |  | —  |  |  | —  |  |
| Total |  | $ | 273,674  |  |  | $ | 94,423  |  |  | $ | 23,095  |  |  | $ | 19,722  |  |

Fair Value of Financial InstrumentsAs of September 30, 2022 the fair value of our senior unsecured notes was approximately $2.8 billion, which are designated as Level 2 in the fair value hierarchy. Our valuation technique is based primarily on prices and other relevant information generated by observable transactions involving identical or comparable assets or liabilities.GuaranteesWe guarantee the borrowings of certain independently controlled automotive parts stores and businesses (“independents”) and certain other affiliates in which we have a noncontrolling equity ownership interest (“affiliates”). While such borrowings of the independents and affiliates are outstanding, we are required to maintain compliance with certain covenants. At September 30, 2022, we were in compliance with all such covenants.As of September 30, 2022, the total borrowings of the independents and affiliates subject to guarantee by us were approximately $908 million. These loans generally mature over periods from one to six years. We regularly monitor the performance of these loans and the ongoing operating results, financial condition and ratings from credit rating 9
