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FINANCIAL INSTRUMENTS AND RISKS MANAGEMENT | 12 Months Ended
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Dec. 31, 2015
FINANCIAL INSTRUMENTS AND RISKS MANAGEMENT [Abstract] |
FINANCIAL INSTRUMENTS AND RISKS MANAGEMENT |
NOTE 19 - | FINANCIAL INSTRUMENTS AND RISKS MANAGEMENT
| A. | Concentrations of credit risks
Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash and cash equivalents, accounts receivables, marketable securities and derivatives. Most of the Group's cash and cash equivalents, deposits in short-term investments (and investments in trading marketable securities), as of December 31, 2015 and 2014, were deposited with major banks (mostly in Israel) with high credit rating. The Company is of the opinion that the credit risk in respect of these balances is immaterial. Most of the Group's sales are made in Israel, Brazil, Argentina and the United States, to a large number of customers, including insurance companies. Management periodically evaluates the collectability of the trade receivables to determine the amounts that are doubtful of collection and determine a proper allowance for doubtful accounts. Accordingly, the Group's trade receivables do not represent a substantial concentration of credit risk. The company entered into foreign exchange forward contracts intended to protect against the increase in the purchase price of forecasted inventory purchases dominated in currencies other then the functional currency of the purchasing entity.
| B. | Foreign exchange risk management
The Group operates internationally, which gives rise to exposure to market risks mainly from changes in exchange rates of foreign currencies in relation to the functional currency of each of the entities of the Group. During 2013 and 2014 the Company enter ed into foreign currency forward transactions in order to protect itself against the risk that the eventual cash flows resulting from anticipated transactions (mainly purchases of inventory), denominated in currencies other than the functional currency, will be affected by changes in exchange rates. As of December 31, 2015, 7 transactions originated in 2014 were remained outstanding. During 2013, 2014 and 2015, all the financial derivatives were designated and accounted for as hedging instruments. The following table summarizes a tabular disclosure of (a) fair values of derivative instruments in the balance sheets and (b) the effect of derivative instruments in the statements of income: Fair values of derivative instruments:
|  | Asset derivatives |
As of December 31, 2015 |  | Thousands of US dollars |
|  | Balance sheet location |  | Fair value |
Derivatives designated as hedging instruments: |  |  |  |  |
Foreign exchange contracts |  | Other current Assets |  | 1,063 |
|  | Liability derivatives |
As of December 31, 2014 |  | Thousands of US dollars |
|  | Balance sheet location |  | Fair value |
Derivatives designated as hedging instruments: |  |  |  |  |
Foreign exchange contracts |  | Other current Assets |  | 1,580 |
|  | Other no current Assets |  | 984 |
|  |  |  | 2,564 |
Amounts reclassified to statement of income:
Derivatives designated as hedging instruments |  | Location of loss recognized in income |  | Amount of gain recognized in income |
Year ended December 31, 2015 |  |  |  | Thousands of US dollars |
Foreign exchange contracts |  | Cost of revenues |  | 1,616 |
Derivatives designated as hedging instruments |  | Location of loss recognized in income |  | Amount of gain recognized in income |
Year ended December 31, 2014 |  |  |  | Thousands of US dollars |
Foreign exchange contracts |  | Cost of revenues |  | 39 |
As of December 31, 2015, the notional amount of forward exchange contracts with respect to cash flow hedge of anticipated transactions amounted to US$ 10.5 million (US$ 1.5 million per month for the next 7 months).
| C. | Fair value of financial instruments
The Company measures fair value and discloses fair value measurements for financial assets and liabilities. Fair value is an exit price, representing the amount that would be received to sell an asset or the amount that would be paid to transfer a liability in an orderly transaction between market participants. The Company measured cash equivalents, marketable securities and derivative financial instruments at fair value. Such financial instruments are measured at fair value, on a recurring basis. The measurement of cash equivalents are classified within Level 1. The fair value of derivatives generally reflects the estimated amounts that the Company would receive or pay to terminate the contracts at the reporting dates, based on the prevailing currency prices and the relevant interest rates. Such measurement is classified within Level 2. The fair value of the financial instruments included in the working capital of the Group (cash and cash equivalents, deposit in escrow, accounts receivable, accounts payable and other current assets and liabilities) approximates their carrying value, due to the short-term maturity of such instruments. See also Note 1V. The Company's financial assets measured at fair value on a recurring basis, consisted of the following types of instruments as of December 31, 2015 and 2014:
|  | December 31, 2015 |
(in thousands) |  | Level 1 |  | Level 2 |  | Level 3 |
Trading securities |  | 2,035 |  |  |  |  |
Derivatives designated as hedging instruments |  | - |  | 1,063 |  | - |
|  | December 31, 2014 |
(in thousands) |  | Level 1 |  | Level 2 |  | Level 3 |
Trading securities |  | 2,362 |  |  |  |  |
Derivatives designated as hedging instruments |  | - |  | 2,564 |  | - |

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- Definition The entire disclosure for any concentrations existing at the date of the financial statements that make an entity vulnerable to a reasonably possible, near-term, severe impact. This disclosure informs financial statement users about the general nature of the risk associated with the concentration, and may indicate the percentage of concentration risk as of the balance sheet date. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=51801978&loc=d3e6327-108592 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 20 -URI http://asc.fasb.org/extlink&oid=49121117&loc=d3e13531-108611 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -SubTopic 10 -Section 50 -Paragraph 20 -URI http://asc.fasb.org/extlink&oid=51801978&loc=d3e6404-108592 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=51801978&loc=d3e6442-108592 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -SubTopic 10 -Section 50 -Paragraph 18 -URI http://asc.fasb.org/extlink&oid=51801978&loc=d3e6351-108592 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=49121117&loc=d3e13537-108611 + Details
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