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Derivative Instruments And Hedging Activities
 12 Months Ended
Jun. 30, 2011
Derivative Instruments And Hedging Activities  
Derivative Instruments And Hedging Activities

NOTE 15—DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Foreign Currency Forward Contracts

In July 2010, we entered into a hedging program with a Canadian chartered bank to limit the potential foreign exchange fluctuations incurred on future cash flows related to a portion of the payroll expenses that are expected to be paid by our Canadian subsidiary. We operate internationally and are therefore exposed to foreign currency exchange rate fluctuations in the normal course of our business, in particular to changes in the Canadian Dollar ("CAD") on account of large costs that get incurred from our centralized Canadian operations, and are denominated in CAD. As part of our risk management strategy, we use derivative instruments to hedge portions of our payroll exposure. We do not use these forward contracts for trading or speculative purposes. These forward contracts typically mature between one and twelve months.

We have designated these transactions as cash flow hedges of forecasted transactions under ASC Topic 815 "Derivatives and Hedging" (ASC Topic 815). As the critical terms of the hedging instrument, and of the entire hedged forecasted transaction, are the same, in accordance with paragraph 815-20-25-84 of ASC Topic 815 we have been able to conclude that changes in fair value or cash flows attributable to the risk being hedged are expected to completely offset at inception and on an ongoing basis. Accordingly, quarterly unrealized gains or losses on the effective portion of these forward contracts have been included within other comprehensive income. The fair value of the contracts, as of June 30, 2011, is recorded within "Prepaid expenses and other current assets".

As of June 30, 2011, the notional amount of forward contracts we held to sell U.S. dollars in exchange for Canadian dollars was $16.8 million (June 30, 2010—nil).

Fair Value of Derivative Instruments and Effect of Derivative Instruments on Financial Performance

The effect of these derivative instruments on our consolidated financial statements as of, and for the year ended June 30, 2011, were as follows (amounts presented do not include any income tax effects).

Fair Value of Derivative Instruments in the Condensed Consolidated Balance Sheets (see note 14)

 

Asset Derivatives

    Balance Sheet Location      Fair Value  

Foreign currency forward contracts designated as cash flow hedges

     
 		 Prepaid expenses and
other current assets		   
  		    $ 1,802   
     

 

 

  

Effects of Derivative Instruments on Income and Other Comprehensive Income (OCI)

 

Derivative in Cash Flow
Hedging Relationship

   Amount of Gain or
(Loss) Recognized in OCI
on Derivative (Effective
Portion)		     Location of
Gain or (Loss)
Reclassified
from
Accumulated
OCI into
Income
(Effective
Portion)		     Amount of Gain or
(Loss) Reclassified from
Accumulated OCI into
Income (Effective
Portion)		     Location of
Gain or
(Loss)
Recognized
in Income  on
Derivative
(Ineffective
Portion and
Amount
Excluded
from
Effectiveness
Testing)		     Amount of Gain
or (Loss)
Recognized in
Income on
Derivative
(Ineffective
Portion
and Amount
Excluded
from Effectiveness
Testing)		  
    Year ended June 30, 2011           Year ended June 30, 2011           Year ended June 30, 2011  

Foreign currency forward contracts

   $ 7,256       
 		 Operating
expenses		   
  		   $ 5,454        N/A      $ —