XML 31 R19.htm IDEA: XBRL DOCUMENT v2.4.0.6
Derivatives
 12 Months Ended
Dec. 31, 2011
Derivatives
13. Derivatives

 

The Company has a large portion of its operations in international markets that subject it to foreign currency fluctuations. The most significant foreign currency exposures occur when revenue and associated accounts receivable are collected in one currency and expenses incurred in order to generate that revenue are accounted for in another currency. The Company’s primary exchange rate exposure relates to payroll, other payroll costs and operating expenses in the Philippines, India and Sri Lanka.

 

To manage its exposure to fluctuations in foreign currency exchange rates, the Company entered into foreign currency forward contracts, authorized under Company policies, with counterparties that were highly rated financial institutions. The Company utilized non-deliverable forward contracts expiring within eighteen months to reduce its foreign currency risk.

 

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking hedge transactions. The Company does not hold or issue derivatives for trading purposes. All derivatives are recognized at their fair value and are classified based on the instrument’s maturity date. The total notional amount for outstanding derivatives as of December 31, 2011 and 2010 was $28.0 million.

 

The following table presents the fair value of derivative instruments included within the consolidated balance sheets as of December 31, 2011 and 2010 (in thousands):

  

  Balance Sheet Location     Fair Value
        2011     2010
Derivatives designated as hedging instruments:              
               
  Prepaid expenses and            
Foreign currency forward contracts other current assets   $ -   $  1,304
Foreign currency forward contracts Accrued expenses      1,782      

 

 

The effect of foreign currency forward contracts designated as cash flow hedges on the consolidated statements of operations for the years ended December 31, 2011 and 2010 were as follows (in thousands):

  

    2011     2010  
             
Net gain (loss) recognized in OCI (1)   $ (1,883 )   $ 2,246  
Net gain reclassified from accumulated OCI into income (2)   $ 1,203     $ 2,242  
Net gain recognized in income (3)   $ —     $ —  

 

(1) Net change in the fair value of the effective portion classified in other comprehensive income ("OCI").

(2) Effective portion classified within direct operating costs.          

(3) There were no ineffective portions for the periods presented.