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Note 12 - Derivatives and Hedging Activities | 6 Months Ended
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Jun. 30, 2024
Notes to Financial Statements |
Derivative Instruments and Hedging Activities Disclosure [Text Block] |
NOTE 12: | DERIVATIVES AND HEDGING ACTIVITIES
The Company follows the requirements of FASB ASC No. 815,” Derivatives and Hedging” which requires companies to recognize all of their derivative instruments as either assets or liabilities in the statement of financial position at fair value. The accounting for changes in fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging transaction and further, on the type of hedging transaction. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation. Due to the Company’s global operations, it is exposed to foreign currency exchange rate fluctuations in the normal course of its business. The Company’s treasury policy allows it to offset the risks associated with the effects of certain foreign currency exposures through the purchase of foreign exchange forward or option contracts (“Hedging Contracts”). The policy, however, prohibits the Company from speculating on such Hedging Contracts for profit. To protect against the increase in value of forecasted foreign currency cash flow resulting from salaries paid in currencies other than the U.S. dollar during the year, the Company instituted a foreign currency cash flow hedging program. The Company hedges portions of the anticipated payroll of its non-U.S. employees denominated in the currencies other than the U.S. dollar for a period of one to twelve months with Hedging Contracts. Accordingly, when the dollar strengthens against the foreign currencies, the decline in present value of future foreign currency expenses is offset by losses in the fair value of the Hedging Contracts. Conversely, when the dollar weakens, the increase in the present value of future foreign currency expenses is offset by gains in the fair value of the Hedging Contracts. These Hedging Contracts are designated as cash flow hedges. For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. As of June 30, 2024, and December 31, 2023, the notional principal amount of the Hedging Contracts to sell U.S. dollars held by the Company was $5,900 and $16,500, respectively. The fair value of the Company’s outstanding derivative instruments is as follows:
|  | June 30, 2024 (unaudited) |  |  | December 31, 2023 |
Derivative assets: |  |  |  |  |  |  |  |
Derivatives designated as cash flow hedging instruments: |  |  |  |  |  |  |  |
Foreign exchange forward contracts |  | $ | 51 |  |  | $ | 988 |
Total |  | $ | 51 |  |  | $ | 988 |
Derivative liabilities: |  |  |  |  |  |  |  |
Derivatives designated as cash flow hedging instruments: |  |  |  |  |  |  |  |
Foreign exchange option contracts |  | $ | 9 |  |  | $ | — |
Total |  | $ | 9 |  |  | $ | — |
The increase (decrease) in unrealized gains (losses) recognized in “accumulated other comprehensive gain (loss)” on derivatives, before tax effect, is as follows:
|  | Six months ended June 30, |  |  | Three months ended June 30, |
|  | 2024 (unaudited) |  |  | 2023 (unaudited) |  |  | 2024 (unaudited) |  |  | 2023 (unaudited) |
Derivatives designated as cash flow hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange option contracts |  | $ | 16 |  |  | $ | (198 | ) |  | $ | 16 |  |  | $ | (93 | )
Foreign exchange forward contracts |  |  | (355 | ) |  |  | (432 | ) |  |  | (160 | ) |  |  | (112 | )
|  | $ | (339 | ) |  | $ | (630 | ) |  | $ | (144 | ) |  | $ | (205 | )
The net (gains) losses reclassified from “accumulated other comprehensive gain (loss)” into income are as follows:
|  | Six months ended June 30, |  |  | Three months ended June 30, |
|  | 2024 (unaudited) |  |  | 2023 (unaudited) |  |  | 2024 (unaudited) |  |  | 2023 (unaudited) |
Derivatives designated as cash flow hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange option contracts |  | $ | (25 | ) |  | $ | 112 |  |  | $ | (25 | ) |  | $ | 112 |
Foreign exchange forward contracts |  |  | (582 | ) |  |  | 462 |  |  |  | (202 | ) |  |  | 291 |
|  | $ | (607 | ) |  | $ | 574 |  |  | $ | (227 | ) |  | $ | 403 |
The Company recorded in cost of revenues and operating expenses a net gain of $227 and $607 during the three and six months ended June 30, 2024, respectively, and a net loss of $403 and $574 during the comparable periods of 2023, related to its Hedging Contracts.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
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