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Derivative Instruments
 12 Months Ended
Jul. 31, 2015
Derivative Instruments [Abstract]  
Derivative Instruments

Note 6—Derivative Instruments

 

The primary risk managed by the Company using derivative instruments is foreign exchange risk. Foreign exchange forward contracts are entered into as hedges against unfavorable fluctuations in the U.S. dollar – Norwegian krone (“NOK”) exchange rate. Zedge is based in Norway and much of its operations are located in Norway. The Company does not apply hedge accounting to these contracts, therefore the changes in fair value are recorded in earnings. By using derivative instruments to mitigate exposures to changes in foreign exchange rates, the Company is exposed to credit risk from the failure of the counterparty to perform under the terms of the contract. The Company minimizes the credit or repayment risk by entering into transactions with high-quality counterparties.

 

The Company’s outstanding contracts at July 31, 2015 were as follows:

 

Settlement Date U.S. Dollar Amount  NOK Amount 
September 2015  750,000   6,163,000 
November 2015  2,729,000   22,169,000 
January 2016  3,000,000   24,257,000 
May 2016  1,000,000   8,239,000 
July 2016  1,000,000   8,200,000 

 

The fair value of outstanding derivative instruments recorded as assets in the accompanying consolidated balance sheets were as follows:

 

July 31
(in thousands)		   2015  2014 
Asset Derivatives Balance Sheet Location      
Derivatives not designated or not qualifying as hedging instruments:          
Foreign exchange forwards Other current assets $38  $— 

  

The fair value of outstanding derivative instruments recorded as liabilities in the accompanying consolidated balance sheets were as follows:

 

July 31
(in thousands)		   2015  2014 
Liability Derivatives Balance Sheet Location      
Derivatives not designated or not qualifying as hedging instruments:          
Foreign exchange forwards Other current liabilities $39  $— 

  

The effects of derivative instruments on the consolidated statements of operations were as follows:

 

    Amount of Gain (Loss) 
Recognized on Derivatives		 
    Year ended July 31, 
(in thousands) 2015  2014  2013 
Derivatives not designated or not qualifying as hedging instruments Location of Gain (Loss) Recognized on Derivatives            
Foreign exchange forwards Other (expense) income, net $(58) $—  $—