1 unchanged sentence
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 physical forward contracts (which are not considered derivatives), and financial derivative instruments including foreign currency forward contracts, commodity swap contracts and interest rate swaps.
−Removed: Financial derivatives are used expressly for hedging purposes and under no circumstances are they used for speculative 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 and locks.
+Added: Financial derivatives are used expressly for hedging purposes and under no circumstances are they used for speculative
When material, we adjust the estimated fair value of our derivative contracts for counterparty or our credit risk.
6 unchanged sentences
The sensitivity analysis assumes instantaneous, parallel shifts in foreign currency exchange rates and commodity prices.
+Added: See NOTE 22, "DERIVATIVES," to our Consolidated Financial Statements for additional information.
Foreign Currency Exchange Rate Risk
6 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: 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: 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.
These derivative instruments are not designated as hedges.
+Added: We are further exposed to foreign currency exchange risk as many of our subsidiaries are subject to fluctuations as the functional currencies of the underlying entities are not our U.S.
+Added: dollar reporting currency.
+Added: In order to minimize movements in certain investments, in 2022 we began entering into foreign exchange forwards designated as net investment hedges.
+Added: Under the terms of our foreign exchange forwards, we agreed with third parties to sell British pounds in exchange for U.S.
+Added: dollar currency at a specified rate at the maturity of the contract.
+Added: These forwards are utilized to hedge portions of our net investments denominated in the British pound against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S.
+Added: The change in fair value related to the spot-to-forward rate difference is recorded as other income (expense) with all other changes in fair value deferred and reported as components of AOCL.
+Added: The unrealized gain or loss is classified into income in the same period when the foreign subsidiary is sold or substantially liquidated.
At December 31, 2022, the potential gain or loss in the fair value of our outstanding foreign currency contracts, assuming a hypothetical 10 percent fluctuation in the currencies of such contracts, would be approximately $9 million.
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The objective of the swaps is to more effectively balance our borrowing costs and interest rate risk.
−Removed: See "Interest Rate Risk" section in Note 12, "DEBT," to our Consolidated Financial Statements for additional information.
At any time, a change in interest rates could have an adverse impact on the fair value of our portfolios.
2 unchanged sentences
While these are our best estimates of the impact of the specified interest rate scenario, actual results could differ from those projected.
−Removed: The sensitivity analysis presented assumes interest rate changes are instantaneous, parallel shifts in the yield curve.
+Added: The sensitivity analysis presented assumes interest rate changes are instantaneous with parallel shifts in the yield curve.
Commodity Price Risk
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At December 31, 2022, realized and unrealized gains and losses related to these hedges were not material to our financial statements.
−Removed: We also enter into physical forward contracts, which qualify for the normal purchases scope exceptions and are treated as purchase commitments.
+Added: We also enter into physical forward contracts, which qualify for the normal purchases scope exception 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.
1 unchanged sentence
These arrangements enable us to fix the prices of a portion of our purchases of these commodities, which otherwise are subject to market volatility.
+Added: Additional information on the physical forwards is included in NOTE 15, "COMMITMENTS AND CONTINGENCIES."
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.