We manage our risk to changes in interest rates through the use of derivative instruments. We do not hold derivative instruments for trading or speculative purposes. For variable rate borrowings, we use fixed interest rate swaps, effectively converting a portion of the variable interest rate payments to fixed interest rate payments. These swaps are designated as cash flow hedges. We transact business globally and are subject to risks associated with changing foreign currency exchange rates. We enter into foreign currency forward contracts in order to mitigate fluctuations in our earnings and cash flows due to changing rates. The foreign currency forward contracts are not designated as hedges and do not qualify for hedge accounting.

The fair value of the interest rate swaps and foreign currency forward contracts was as follows:


	Balance sheet line item	September 30, 2022		December 31, 2021
		(in millions)
Asset derivatives:
Cash flow interest rate swaps	Other long-term assets	$	20	$	—
Liability derivatives:
Cash flow interest rate swaps	Other long-term liabilities	$	—	$	53
Foreign currency forward contracts	Accounts payable and accrued liabilities	16		—

During the three months ended September 30, 2022, we entered into a foreign currency forward contract to offset foreign currency fluctuations of the $310 million Australian dollar preliminary purchase price for the Cobham Special Mission acquisition against the U.S. dollar. As of September 30, 2022, we recorded a $16 million unrealized loss due to the exchange rate movements between the Australian dollar compared to the U.S. dollar. The loss was recorded within Corporate and presented in "Other (expense) income, net" on the condensed consolidated statements of income.

The cash flows associated with the interest rate swaps are classified as operating activities in the condensed consolidated statements of cash flows.

We have interest rate swap agreements to hedge the cash flows of $1.0 billion of the variable rate senior unsecured term loan (the "Variable Rate Loan"). These interest rate swap agreements have a maturity date of August 2025 and a fixed interest rate of 3.00%. The objective of these instruments is to reduce variability in the forecasted interest payments of the Variable Rate Loan, which are based on the LIBOR rate. Under the terms of the interest rate swap agreements, we will receive monthly variable interest payments based on the one-month LIBOR rate and will pay interest at a fixed rate.

The interest rate swap transactions were accounted for as cash flow hedges. The gain/loss on the swaps is reported as a component of other comprehensive income (loss) and is reclassified into earnings when the interest payments on the underlying hedged items impact earnings. A qualitative assessment of hedge effectiveness is performed on a quarterly basis, unless facts and circumstances indicate the hedge may no longer be highly effective.

The effect of the cash flow hedges on other comprehensive income (loss) and earnings for the periods presented was as follows:


	Three Months Ended				Nine Months Ended
	September 30, 2022		October 1, 2021		September 30, 2022		October 1, 2021
	(in millions)
Total interest expense, net presented in the condensed consolidated statements of income in which the effects of cash flow hedges are recorded	$	50	$	47	$	148	$	138

Amount recognized in other comprehensive income (loss)	$	21	$	—	$	57	$	9
Amount reclassified from accumulated other comprehensive income (loss) to interest expense, net	$	2	$	5	$	13	$	14