Maximum exposure to loss

  
Fair Value of Derivative Instruments  
All derivative instruments are recorded at fair value. The Company’s accounting treatment for these derivative instruments is based on its hedge designation. The following tables present the fair values of derivative instruments included in the balance sheets:  


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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
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|  |  | Derivative Assets |  |  |
|  |  |  |  | As of  |  |  |  |  |
| (in millions) |  | Balance Sheet Line Item |  | March 31, 2022 |  | March 31, 2021 |  |  |  |  |  |  |
| Derivatives designated for hedge accounting: |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |
| Foreign currency forward contracts |  | Other current assets |  | $ | 18  |  |  | $ | 9  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |
| Derivatives not designated for hedge accounting: |  |  |  |  |  |  |  |  |  |  |
| Foreign currency forward contracts |  | Other current assets |  | $ | 9  |  |  | $ | 3  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |

  


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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
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|  |  |  |  | Derivative Liabilities |
|  |  |  |  |  |  |  |  | As of  |
| (in millions) |  |  |  |  |  |  |  | Balance Sheet Line Item |  | March 31, 2022 |  | March 31, 2021 |
| Derivatives designated for hedge accounting: |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |
| Foreign currency forward contracts |  |  |  |  |  |  |  | Accrued expenses and other current liabilities |  | $ | —  |  |  | $ | 5  |  |
|  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |
| Derivatives not designated for hedge accounting: |  |  |  |  |
| Foreign currency forward contracts |  |  |  |  |  |  |  | Accrued expenses and other current liabilities |  | $ | 15  |  |  | $ | 3  |  |
|  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |

  
The fair value of foreign currency forward contracts represents the estimated amount required to settle the contracts using current market exchange rates and is based on the period-end foreign currency exchange rates and forward points which are classified as Level 2 inputs.  
Other Risks for Derivative Instruments  
The Company is exposed to the risk of losses in the event of non-performance by the counterparties to its derivative contracts. The amount subject to credit risk related to derivative instruments is generally limited to the amount, if any, by which a counterparty's obligations exceed the obligations of the Company with that counterparty. To mitigate counterparty credit risk, the Company regularly reviews its credit exposure and the creditworthiness of the counterparties. With respect to its foreign currency derivatives, as of March 31, 2022, there were twelve counterparties with concentration of credit risk, and based on gross fair value, the maximum amount of loss that the Company could incur is $16 million.  
The Company also enters into enforceable master netting arrangements with some of its counterparties. However, for financial reporting purposes, it is the Company's policy not to offset derivative assets and liabilities despite the existence of enforceable master netting arrangements. The potential effect of such netting arrangements on the Company's balance sheets is not material for the periods presented.  
Non-Derivative Financial Instruments Designated for Hedge Accounting  
The Company applies hedge accounting for foreign currency-denominated debt used to manage foreign currency exposures on its net investments in certain non-U.S. operations. To qualify for hedge accounting, the hedging instrument must be highly effective at reducing the risk from the exposure being hedged.   
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