filings.toolsItem 7A. Quantitative and Qualitative Disclosures About Market Risk.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risk primarily from changes in interest rates and currency exchange rates. We manage our exposure to these risks by monitoring available financing alternatives, through the development and application of credit granting policies, and by entering into derivative arrangements. We do not foresee any significant changes in either our exposure to fluctuations in interest rates or currency rates or how we manage such exposure in the future.
We use derivative instruments, including cash flow hedges, fair value hedges, net investment in non-U.S. operations hedges, and other derivative instruments, as part of our overall strategy to manage our exposure to market risks associated with fluctuations in interest rates and currency exchange rates. We continue to have exposure to such risks to the extent they are not hedged. See Note 2 for more information on derivative instruments. We use forward contracts not designated as hedging instruments to manage currency exchange rate risk associated with certain cash and intercompany loan balances. We intend to offset the gains and losses related to these forward contracts with the gains and losses related to the remeasurement of our cash and intercompany loan balances, such that there is a negligible effect on earnings. We do not consider the fair value or earnings impact of these forward contracts to be material to our consolidated financial statements.
We are exposed to interest rate risk on our floating-rate notes receivable and floating-rate debt, including the effect of interest rate swaps. Changes in interest rates also impact the fair value of our fixed-rate notes receivable and the fair value of our fixed-rate long-term debt.
The following table sets forth the scheduled maturities and the total fair value as of year-end 2024 for our financial instruments that are impacted by interest rate risk:
| Maturities by Period | |||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | 2025 | 2026 | 2027 | 2028 | 2029 | There- after | Total Carrying Amount | Total Fair Value | |||||||||||||||||||||||||||||||||||||||
| Assets - Maturities represent expected principal receipts. Fair values represent assets. | |||||||||||||||||||||||||||||||||||||||||||||||
| Fixed-rate notes receivable | $ | 7 | $ | 5 | $ | 7 | $ | 4 | $ | — | $ | 15 | $ | 38 | $ | 33 | |||||||||||||||||||||||||||||||
| Average interest rate | 0.75 | % | |||||||||||||||||||||||||||||||||||||||||||||
| Floating-rate notes receivable | $ | 4 | $ | 76 | $ | 6 | $ | 21 | $ | — | $ | — | $ | 107 | $ | 109 | |||||||||||||||||||||||||||||||
| Average interest rate | 6.78 | % | |||||||||||||||||||||||||||||||||||||||||||||
| Liabilities - Maturities represent expected principal payments. Fair values represent liabilities. | |||||||||||||||||||||||||||||||||||||||||||||||
| Fixed-rate debt | $ | (1,300) | $ | (1,195) | $ | (990) | $ | (1,438) | $ | (1,279) | $ | (6,539) | $ | (12,741) | $ | (12,402) | |||||||||||||||||||||||||||||||
| Average interest rate | 4.43 | % | |||||||||||||||||||||||||||||||||||||||||||||
| Floating-rate debt | $ | — | $ | — | $ | (1,582) | $ | — | $ | — | $ | — | $ | (1,582) | $ | (1,582) | |||||||||||||||||||||||||||||||
| Average interest rate | 4.91 | % |
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