1 unchanged sentence
We use various financial instruments, particularly interest rate caps, to manage and reduce the interest rate risk related to our debt.
−Removed: Foreign currency forwards and swaps are also used to manage and reduce the foreign currency exchange rate risk associated with our foreign currency denominated receivables and payables, forecasted royalties, forecasted earnings, cash flows of foreign subsidiaries, and other transactions.
+Added: Foreign currency forwards, spots, and swaps are also used to manage and reduce the foreign currency exchange rate risk associated with our foreign currency denominated receivables and payables, forecasted royalties, forecasted earnings, cash flows of foreign subsidiaries, and other transactions.
We are exclusively an end user of these instruments, which are commonly referred to as derivatives.
We do not engage in trading, market making, or other speculative activities in the derivatives markets.
−Removed: More detailed information about these financial instruments is provided in Note 19— Financial Instruments to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
+Added: More detailed information about these financial instruments is provided in Note 19— Financial Instruments to the Consolidated Financial Statements.
Our principal market exposures are interest rate and foreign currency rate risks.
1 unchanged sentence
In addition, interest rate movements in one country, as well as relative interest rate movements between countries, can impact us.
−Removed: We anticipate that LIBOR and asset-backed commercial paper rates will remain a primary market risk exposure for the foreseeable future.
+Added: We anticipate that LIBOR and asset-backed commercial paper rates will remain a primary market risk exposure until an appropriate replacement is adopted.
• We are currently evaluating the impact of the transition from LIBOR as an interest rate benchmark to other potential alternative reference rates, including but not limited to SOFR.
3 unchanged sentences
Management will continue to actively assess the related opportunities and risks involved in this transition.
−Removed: On October 27, 2020, we closed on the renewal of our USD bank conduit facility (see Note 16— Debt to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional details) and adopted appropriate LIBOR disclosures for asset-backed securities (“ABS”) financing structures as part of the renewal.
−Removed: We intend to include such language in our other relevant agreements prior to the end of 2021.
+Added: We adopted appropriate LIBOR replacement rate transition language into the agreements for the renewal of our USD bank conduit facility in 2020 and the renewal of the credit agreement governing the revolving credit facility and term loan B which closed on October 22, 2021.
+Added: These agreements represented our largest exposure to LIBOR.
• We have foreign currency rate exposure to exchange rate fluctuations worldwide particularly with respect to the Euro, British pound sterling, Australian and Canadian dollars, and Mexican peso.
3 unchanged sentences
The estimates assume instantaneous, parallel shifts in interest rate yield curves and exchange rates.
−Removed: We have determined, through such analyses, that a hypothetical 10% change in the interest rates would have resulted in a less than $1 million increase or decrease in annual consumer financing interest expense and total interest expense.
+Added: We have determined, through such analyses, that a hypothetical 10% change in the interest
+Added: rates would have resulted in a less than $1 million increase or decrease in annual consumer financing interest expense and total interest expense.
+Added: We use a current market pricing model to assess the changes in the value of our foreign currency derivatives used to hedge underlying exposure that primarily consist of our non-functional current assets and liabilities and those of our subsidiaries.
+Added: The primary assumption used in these models is a hypothetical 10% weakening or strengthening of the U.S.
+Added: dollar against all our currency exposures as of December 31, 2021.
+Added: As of December 31, 2021, the absolute notional amount of our outstanding foreign exchange hedging instruments was $58 million.
We have determined that a hypothetical 10% change in the foreign currency exchange rates would have resulted in an approximate increase or decrease to the fair value of our outstanding forward foreign currency exchange contracts of $4 million, which would generally be offset by an opposite effect on the underlying exposure being economically hedged.
As such, we believe that a 10% change in interest rates or foreign currency exchange rates would not have a material effect on our prices, earnings, fair values, or cash flows.
−Removed: Our variable rate borrowings, which include our term loan, non-recourse conduit facilities, and revolving credit facility, expose us to risks caused by fluctuations in the applicable interest rates.
+Added: Our variable rate borrowings, which include our term loan B, non-recourse conduit facilities, and revolving credit facility, expose us to risks caused by fluctuations in the applicable interest rates.
The total outstanding balance of such variable rate borrowings at December 31, 2021 was $320 million in non-recourse debt and $288 million in corporate debt.
5 unchanged sentences
The primary assumption used in these models is that a 10% increase or decrease in the benchmark interest rate produces a parallel shift in the yield curve across all maturities.
−Removed: We use a current market pricing model to assess the changes in the value of our foreign currency derivatives used to hedge underlying exposure that primarily consist of our non-functional current assets and liabilities and those of our subsidiaries.
−Removed: The primary assumption used in these models is a hypothetical 10% weakening or strengthening of the U.S.
−Removed: dollar against all our currency exposures as of December 31, 2020.
−Removed: The gains and losses on the hedging instruments are largely offset by the gains and losses on the underlying assets, liabilities, or expected cash flows.
−Removed: As of December 31, 2020, the absolute notional amount of our outstanding foreign exchange hedging instruments was $83 million.
−Removed: We have determined through such analyses, that a hypothetical 10% change in foreign currency exchange rates would not generate a material increase or decrease to the fair value of our outstanding forward foreign currency exchange contracts, which would generally be offset by an opposite effect on the underlying exposure being economically hedged.
Our total market risk is influenced by a wide variety of factors including the volatility present within the markets and the liquidity of the markets.
1 unchanged sentence
While probably the most meaningful analysis, these “shock tests” are constrained by several factors, including the necessity to conduct the analysis based on a single point in time and the inability to include the complex market reactions that normally would arise from the market shifts modeled.
−Removed: We used December 31, 2020, market rates on outstanding financial instruments to perform the sensitivity analysis separately for each of our market risk exposures — interest and foreign currency rate instruments.
+Added: We used December 31, 2021 market rates on outstanding financial instruments to perform the sensitivity analysis separately for each of our market risk exposures:
+Added: interest and foreign currency rate instruments.
The estimates are based on the market risk sensitive portfolios described in the preceding paragraphs and assume instantaneous, parallel shifts in interest rate yield curves and exchange rates.
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.