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Hedging Activities and Fair Value Measurements
 12 Months Ended
Dec. 31, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Hedging Activities and Fair Value Measurements

 

  Note 15. Hedging Activities and Fair Value Measurements

 

Hedging Activity

 

During the quarter ended September 30, 2019, we entered into several foreign currency non-delivery forward and collar contracts to hedge the fluctuations in the exchange rate between the Colombian Peso and the U.S. Dollar. Our contracts are designated as cash flow hedges since they are highly effective in offsetting changes in the cash flows attributable to forecasted Colombian Peso denominated costs and expenses.

 

Guidance under the Financial Instruments Topic 825 of the Codification requires us to record our hedge contracts at fair value and consider our credit risk for contracts in a liability position, and our counter-party’s credit risk for contracts in an asset position, in determining fair value. We assess our counter-party’s risk of non-performance when measuring the fair value of financial instruments in an asset position by evaluating their financial position, including cash on hand, as well as their credit ratings.

 

As of December 31, 2021, the fair value of foreign currency collar contracts was not measured since we currently do not have any open contracts, with the last settlements taking place in January and February 2021.

 

We assess the effectiveness of our foreign currency collar contracts by comparing the change in the fair value of the collar contracts to the change in the expected cash to be paid for the hedged item. The effective portion of the gain or loss on our foreign currency collar contracts is reported as a component of accumulated other comprehensive income and is reclassified into earnings in the same line item in the income statement as the hedged item in the same period or periods during which the transaction affects earnings. The amount of gains, net, recognized in the “accumulated other comprehensive income” line item in the consolidated balance sheet as of December 31, 2020, were reclassified to earnings during the first quarter of 2021 for $185.

 

The fair value of our foreign currency hedges is classified in the accompanying consolidated balance sheets as of December 31, 2020, are as follows:

 

   Derivative Assets    Derivative Liabilities
   December 31, 2020    December 31, 2020

Derivatives designated as hedging

instruments under Subtopic 815-20:

 

Balance Sheet

Location

  Fair
Value		    

Balance Sheet

Location

 

Fair

Value

 
                 
Derivative instruments:                      
Non-Delivery Collar Contracts  Other current assets  $230     Accrued liabilities  $- 
Total derivative instruments  Total derivative assets  $230     Total derivative liabilities  $- 

 

 

The ending accumulated balance for the foreign currency collar contracts included in accumulated other comprehensive income, net of tax, was $159 as of December 31, 2020, comprised of a derivative gain of $230 and an associated net tax liability of $71.

 

The following table presents the gains (losses) on derivative financial instruments, and their classifications within the accompanying consolidated financial statements, for the year months ended December 2021:

 

   Derivatives in Cash Flow Hedging Relationships
    

Location of Gain or (Loss)

Reclassified from

Accumulated

 

Amount of Gain or (Loss)

 
   

Amount of Gain or (Loss)

 Recognized in OCI (Loss) on

  OCI (Loss) into 

Reclassified from

Accumulated

 
   Derivatives  Income  OCI (Loss) into Income 
   Year Ended     Year Ended 
   December 31,    December 31,      December 31,   December 31, 
   2021    2020      2021   2020 
                                

Non-delivery

Collar Contracts

   $       -    $(635)  Operating Revenues  $-   $(610)

 

 

Fair Value Measurements

 

The Company accounts for financial assets and liabilities in accordance with accounting standards that define fair value and establish a framework for measuring fair value. The hierarchy prioritizes the inputs into three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value. A financial asset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

 

The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and advances from customers approximate their fair value due to their relatively short-term maturities. The Company bases its fair value estimate for long term debt obligations on its internal valuation.

 

As of December 31, 2021, financial instruments carried at amortized cost that do not approximate fair value consist of long-term debt. See Note 13 - Debt. The fair value of long-term debt was calculated based on an analysis of future cash flows discounted with our average cost of debt which is based on market rates, which are level 2 inputs.

 

The following table summarizes the fair value and carrying amounts of our long-term debt:

 

  

December 31,

2021

  

December 31,

2020

 
Fair Value   194,285    238,753 
Carrying Value   188,355    222,722