13. Derivatives

The Company conducts 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 to generate that revenue are incurred in another currency. The Company’s primary exchange rate exposure relates to payroll, other payroll costs and operating expenses in the Philippines, India, Sri Lanka and Israel.

In addition, although most of the Company’s revenues are denominated in U.S. dollars, a significant portion of the total revenues is denominated in Canadian dollars, Pound Sterling and Euros.

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 classified based on the instrument’s maturity date. As of December 31, 2018, we had no outstanding forward contracts. The total notional amount for outstanding derivatives as of December 31, 2019 was $4.3 million.

The following table presents the fair value of derivative instruments included within the consolidated balance sheets as of December 31, 2019 and 2018 (in thousands):


	Balance Sheet Location	Fair Value
		2019		2018
Derivatives designated as hedging instruments:
Foreign currency forward contracts	Prepaid expenses and other current assets	$	33	$	—

The effect of foreign currency forward contracts designated as cash flow hedges on the consolidated statements of operations for the years ended December 31, 2019 and 2018 were as follows (in thousands):


	2019		2018

Net gain (loss) recognized in OCI(1)	$	46	$	(695)
Net gain (loss) reclassified from accumulated OCI into income(2)	$	13	$	(353)
Net gain recognized in income(3)	$	—	$	—

⁽¹⁾

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

⁽²⁾

Effective portion classified within direct operating costs

⁽³⁾

There were no ineffective portions for the period presented.