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We are exposed to financial risk resulting from volatility in foreign exchange rates, interest rates and commodity prices.
−Removed: This risk is closely monitored and managed through the use of financial derivative instruments including foreign currency forward contracts, interest rate swaps, commodity swap contracts, zero-cost collars and physical forward contracts.
−Removed: These instruments, as further described below, are accounted for as cash flow or fair value hedges or as economic hedges not designated as hedges for accounting purposes.
+Added: This risk is closely monitored and managed through the use of physical forward contracts (which are not considered derivatives), and financial derivative instruments including foreign currency forward contracts, commodity swap contracts and interest rate swaps.
Financial derivatives are used expressly for hedging purposes and under no circumstances are they used for speculative purposes.
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The sensitivity analysis assumes instantaneous, parallel shifts in foreign currency exchange rates and commodity prices.
−Removed: Foreign Exchange Rate Risk
+Added: Foreign Currency Exchange Rate Risk
As a result of our international business presence, we are exposed to foreign currency exchange rate risks.
5 unchanged sentences
To minimize the income volatility resulting from the remeasurement of net monetary assets and payables denominated in a currency other than the functional currency, we enter into foreign currency forward contracts, which are considered economic hedges.
−Removed: The objective is to offset the gain or loss from remeasurement with the gain or loss from the fair market valuation of the forward contract.
+Added: objective is to offset the gain or loss from remeasurement with the gain or loss from the fair market valuation of the forward contract.
These derivative instruments are not designated as hedges.
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We are exposed to market risk from fluctuations in interest rates.
−Removed: We manage our exposure to interest rate fluctuations through the use of interest rate swaps.
+Added: We manage our exposure to interest rate fluctuations through the use of interest rate swaps and interest rate locks.
The objective of the swaps is to more effectively balance our borrowing costs and interest rate risk.
−Removed: See Note 11, "DEBT," "Interest Rate Risk" section for additional information.
+Added: See "Interest Rate Risk" section in Note 12, "DEBT," to our Consolidated Financial Statements for additional information.
+Added: At any time, a change in interest rates could have an adverse impact on the fair value of our portfolios.
+Added: Assuming a hypothetical adverse movement in interest rates of one percentage point, the combined value of our interest rate derivatives portfolios would be reduced by $64 million, as calculated as of December 31, 2021.
+Added: However, this does not take into consideration an offset in the underlying hedged items.
+Added: While these are our best estimates of the impact of the specified interest rate scenario, actual results could differ from those projected.
+Added: The sensitivity analysis presented assumes interest rate changes are instantaneous, parallel shifts in the yield curve.
Commodity Price Risk
We are exposed to fluctuations in commodity prices due to contractual agreements with component suppliers.
−Removed: In order to protect ourselves against future price volatility and, consequently, fluctuations in gross margins, we periodically enter into commodity swap, forward and zero-cost collar contracts with designated banks and other counterparties to fix the cost of certain raw material purchases with the objective of minimizing changes in inventory cost due to market price fluctuations.
−Removed: Commencing in 2019, these commodity swaps are designated and qualify as cash flow hedges.
+Added: In order to protect ourselves against future price volatility and, consequently, fluctuations in gross margins, we periodically enter into commodity swap and forward contracts with designated banks and other counterparties to fix the cost of certain raw material purchases with the objective of minimizing changes in inventory cost due to market price fluctuations.
+Added: These commodity swaps are designated and qualify as cash flow hedges.
At December 31, 2021, realized and unrealized gains and losses related to these hedges were not material to our financial statements.
−Removed: The physical forward contracts qualify for the normal purchases scope exceptions and are treated as purchase commitments.
−Removed: The commodity zero-cost collar contracts that represent an economic hedge, but are not designated for hedge accounting, are marked to market through earnings.
−Removed: At December 31, 2020, the potential gain or loss related to the outstanding commodity zero-cost collar contracts, assuming a hypothetical 10 percent fluctuation in the price of such commodities, would be approximately $1 million.
−Removed: The sensitivity analysis of the effects of changes in commodity prices assumes the notional value to remain constant for the next 12 months.
−Removed: The analysis ignores the impact of commodity price movements on our competitive position and potential changes in sales levels.
−Removed: Any change in the value of the zero-cost collar contracts, real or hypothetical, would be significantly offset by an inverse change in the value of the underlying hedged items.
+Added: We also enter into physical forward contracts, which qualify for the normal purchases scope exceptions and are treated as purchase commitments.
We also limit our exposure to commodity price risk by entering into purchasing arrangements to fix the price of certain volumes of platinum and palladium expected to be used in our products.
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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.