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All hedging transactions were authorized and executed pursuant to clearly defined policies and procedures, which strictly prohibit the use of financial instruments for speculative purposes.
−Removed: At the inception of the hedge, Adient assessed the effectiveness of the hedge instrument and designates the hedge instrument as either (1) a hedge of a recognized asset or liability or of a recognized firm commitment (a fair value hedge), (2) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to an unrecognized asset or liability (a cash flow hedge) or (3) a hedge of a net investment in a non-U.S.
+Added: At the inception of the hedge, Adient assesses the effectiveness of the hedge instrument and designates the hedge instrument as either (1) a hedge of a recognized asset or liability or of a recognized firm commitment (a fair value hedge), (2) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to an unrecognized asset or liability (a cash flow hedge) or (3) a hedge of a net investment in a non-U.S.
operation (a net investment hedge).
−Removed: Adient performed hedge effectiveness testing on an ongoing basis depending on the type of hedging instrument used.
+Added: Adient performs hedge effectiveness testing on an ongoing basis depending on the type of hedging instrument used.
All other derivatives not designated as hedging instruments under ASC 815, “Derivatives and Hedging,” are revalued in the consolidated statements of income.
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operations and compared it with the outstanding net investment hedge principal on a quarterly basis.
−Removed: All hedges were deemed highly effective if the aggregate outstanding principal of the hedge instrument designated as the net investment hedge in a non-U.S.
+Added: All hedges are deemed highly effective if the aggregate outstanding principal of the hedge instrument designated as the net investment hedge in a non-U.S.
operation is between 80% and 125% of its net investment position in respective non-U.S.
Further details are provided in Part II, Item 8 of this Annual Report in the notes to consolidated financial statements.
−Removed: A discussion of Adient's accounting policies for derivative financial instruments is included in Note 1, "Basis of Presentation and Summary of Significant Accounting Policies," and further disclosure relating to derivatives and hedging activities is included in Note 10, "Derivative Instruments and Hedging Activities," and Note 11, "Fair Value Measurements," of the notes to consolidated financial statements.
+Added: A discussion of Adient's accounting policies for derivative financial instruments is included in Note 1, “Organization and Summary of Significant Accounting Policies,” and further disclosure relating to derivatives and hedging activities is included in Note 10, “Derivative Instruments and Hedging Activities,” and Note 11, “Fair Value Measurements,” of the notes to consolidated financial statements.
Interest Rate Risk
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Changes in global interest rates affect the interest earned on Adient's cash, cash equivalents and marketable securities and the fair value of those securities, as well as costs associated with hedging and interest paid on Adient's debt.
−Removed: Adient purchased interest rate caps during fiscal 2019 to selectively limit the impact of USD LIBOR increases on its interest payments related to Adient's Term Loan B Agreement.
−Removed: The interest rate caps were designated as cash flow hedges under ASC 815.
−Removed: During fiscal 2021, in conjunction with the Term Loan B Amendment as discussed in Note 9, "Debt and Financing Arrangements," Adient de-designated these contracts, the impact of which was not material.
−Removed: These contracts matured in fiscal 2022.
−Removed: As of September 30, 2022, Adient had no outstanding interest rate caps.
Adient's investment policy and strategy are focused on preservation of capital and supporting Adient's liquidity requirements.
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The policy requires investments generally to be investment grade, with the primary objective of minimizing the potential risk of principal loss.
−Removed: Adient plc | Form 10-K | 50
Further details regarding Adient's debt and financing arrangements are provided in Note 9, “Debt and Financing Arrangements,” of the notes to consolidated financial statements.
+Added: Adient plc | Form 10-K | 50
Foreign Currency Risk
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Gains and losses resulting from hedging instruments offset the foreign exchange gains or losses on the underlying assets and liabilities being hedged.
−Removed: The maturities of the forward exchange contracts generally coincided with the settlement dates of the related transactions.
+Added: The maturities of the forward exchange contracts generally coincide with the settlement dates of the related transactions.
Realized and unrealized gains and losses on these contracts are recognized in the same period as gains and losses on the hedged items.
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These are marked-to-market through other comprehensive income when effective.
−Removed: Adient's euro-denominated bond and certain cross-currency interest rate swaps have been designated to selectively hedge portions of Adient's net investments in Europe and Japan.
−Removed: The currency effects of its euro-denominated bond and cross-currency interest rate swaps are reflected in the accumulated other comprehensive income account within shareholders' equity attributable to Adient where they offset gains and losses recorded on Adient's net investments in Europe and Japan.
−Removed: The cross-currency interest rate swap in Japan matured during fiscal 2021.
−Removed: At September 30, 2022 and 2021, Adient estimates that an unfavorable 10% change in all applicable exchange rates versus the U.S.
−Removed: Dollar would have decreased net unrealized gains or increased net unrealized losses by approximately $61 million and $43 million, respectively.
+Added: Adient's euro-denominated bond and certain foreign currency forward contracts have been designated to selectively hedge portions of Adient's net investments in Europe and China.
+Added: The currency effects of its euro-denominated bond and foreign currency forward contracts are reflected in the accumulated other comprehensive income account (“AOCI”) within shareholders' equity attributable to Adient where they offset gains and losses recorded on Adient's net investments in Europe and China.
+Added: As of September 30, 2023, the €123 million ($130 million) aggregate principal amount of 3.50% euro-denominated unsecured notes due August 2024 was designated as a net investment hedge to selectively hedge portions of Adient's net investment in Europe.
+Added: At September 30, 2023 and 2022, Adient estimates that the fair value of outstanding foreign exchange contracts would have been adversely impacted by approximately $47 million and $31 million, respectively, from an unfavorable 10% change in all applicable foreign currency exchange rates versus the U.S.
+Added: In practice, such a change would generally be offset by an opposing fair value change of the underlying asset, liability or transaction.
Commodity Risk
Adient's exposures to market risk from changes in the price of production material are managed primarily through indexing arrangements and negotiations with suppliers and customers, although not all customer commodity exposures are covered by indexing arrangements and there can be no assurance that Adient will otherwise be able to recover all such costs.
−Removed: Adient’s current indexing arrangements with its customers typically provide for partial recovery of commodity price changes on a lag of 3 months to, in some cases, more than 12 months between cost incurrence and partial recovery.
+Added: Adient’s current indexing arrangements with its customers typically provide for partial recovery of commodity price changes on a lag of 3 months to, in some cases, more than 12 months between cost occurrence and partial recovery.
Adient continues to evaluate its arrangements with its customers and to pursue negotiated commercial settlements related to commodity pricing matters.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.