Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We maintain a mix of fixed-rate and variable-rate debt and we are exposed to the market risk of adverse changes in interest rates. In order to manage the cost and volatility relating to the interest cost of our outstanding debt, we enter into various interest rate risk management derivative transactions in accordance with our policy.

We monitor our exposure to the risk of adverse changes in interest rates through the use of techniques that include market valuation and sensitivity analyses. We do not engage in any speculative or leveraged derivative transactions.

Our interest rate derivative financial instruments, which primarily include cross currency swaps, represent an integral part of our interest rate risk management program. These cross-currency swaps effectively change our current fixed interest rates to different fixed interest rates.

The effect of our interest rate derivative financial instruments to our consolidated interest expense was a decrease of $9 million in 2020, a decrease of $49 million in 2019, and an increase of $2 million in 2018. Interest rate derivative financial instruments may have a significant effect on consolidated interest expense in the future.

The table below summarizes by contractual year of maturity the principal amount of our debt, effective rates, and fair values subject to interest rate risk maintained by us as of December 31, 2020.

The average interest rates on our debt in the table above reflect the effects of our derivative financial instruments. We estimate interest rates on variable rate debt and swaps using the relevant average implied forward rates through the year of maturity based on the yield curve in effect on December 31, 2020, plus the applicable borrowing margin.

Additionally, we have a $5.2 billion variable rate term loan presented separately as a collateralized obligation that will mature in March 2024. We entered into a series of variable-to-fixed rate interest rate swaps on $5.2 billion of this term loan with average pay rate and average receive rate related to these interest rate swaps of 1.12% and 0.15% as of December 31, 2020, respectively. As of December 31, 2020 and 2019, the estimated fair value of the term loan was $5.2 billion for each period, and the estimated fair value of the related interest rate swaps was a net liability of $155 million and a net asset of $34 million, respectively.

See Notes 1, 6 and 9 for additional information.

We have significant operations in a number of countries outside the United States through Sky and NBCUniversal, and certain of our operations are conducted in foreign currencies. The value of these currencies fluctuates relative to the U.S. dollar. These changes could adversely affect the U.S. dollar equivalent value of our non-U.S. dollar operations, which could negatively affect our business, financial condition and results of operations in a given period or in specific territories.

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As part of our overall strategy to manage the level of exposure to the risk of foreign exchange rate fluctuations, we enter into derivative financial instruments related to a significant portion of our foreign currency exposure for transactions denominated in other than the functional currency. We enter into foreign currency forward contracts that change in value as currency exchange rates fluctuate to protect the functional currency equivalent value of non-functional currency denominated assets, liabilities, commitments, and forecasted non-functional currency revenue and expenses. In accordance with our policy, we hedge forecasted foreign currency transactions for periods generally not to exceed 30 months. As of December 31, 2020 and 2019, we had foreign exchange contracts on transactions other than debt with a total notional value of $8.1 billion and $6.3 billion, respectively. As of December 31, 2020 and 2019, the aggregate estimated fair value of these foreign exchange contracts was not material.

We use cross-currency swaps as cash flow hedges for foreign currency denominated debt obligations when those obligations are denominated in a currency other than the functional currency. Cross-currency swaps effectively convert foreign currency denominated debt to debt denominated in the functional currency, which hedge currency exchange risks associated with foreign currency denominated cash flows such as interest and principal debt repayments. As of December 31, 2020 and 2019, we had cross-currency swaps designated as cash flow hedges on $1.7 billion and $3.7 billion of our foreign currency denominated debt, respectively. As of December 31, 2020 and 2019, the aggregate estimated fair values of cross-currency swaps designated as cash flow hedges were a net liability of $45 million and a net asset of $373 million, respectively.

We are also exposed to foreign exchange risk on the consolidation of our foreign operations. We have foreign currency denominated debt and cross-currency swaps designated as hedges of our net investments in certain of these subsidiaries. Transaction gains and losses resulting from currency movements on debt and changes in fair value of cross-currency swaps designated as net investment hedges are recorded within the currency translation adjustments component of accumulated other comprehensive income (loss). As of December 31, 2020 and 2019, the amount of our net investment in foreign subsidiaries hedged using foreign currency denominated debt was $10.3 billion and $9.2 billion, respectively, and the amount of our net investment in foreign subsidiaries hedged using cross-currency swaps was $4.0 billion and $4.8 billion, respectively. As of December 31, 2020 and 2019, the aggregate estimated fair value of these cross-currency swaps was a net liability of $376 million and $373 million, respectively. The amount of pre-tax gains (losses) related to net investment hedges recognized in the cumulative translation adjustments component of other comprehensive income (loss) were losses of $686 million in 2020, gains of $343 million in 2019 and losses of $3 million in 2018.

We have analyzed our foreign currency exposure related to our foreign operations as of December 31, 2020, including our hedging contracts, to identify assets and liabilities denominated in a currency other than their functional currency. For those assets and liabilities, we then evaluated the effect of a hypothetical 10% shift in currency exchange rates, inclusive of the effects of derivatives. The results of our analysis indicate that such a shift in exchange rates would not have a material impact on our 2020 net income attributable to Comcast Corporation.

We manage the credit risks associated with our derivative financial instruments through diversification and the evaluation and monitoring of the creditworthiness of counterparties. Although we may be exposed to losses in the event of nonperformance by counterparties, we do not expect such losses, if any, to be significant. We have agreements with certain counterparties that include collateral provisions. These provisions require a party with an aggregate unrealized loss position in excess of certain thresholds to post cash collateral for the amount in excess of the threshold. The threshold levels in our collateral agreements are based on our and the counterparty’s credit ratings. As of December 31, 2020 and 2019, we were not required to post collateral under the terms of these agreements, nor did we hold any collateral under the terms of these agreements.

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