XML 65 R10.htm IDEA: XBRL DOCUMENT v2.4.0.8
Note 4 - Derivative Instruments and Hedging Activities
 6 Months Ended
Jun. 30, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Disclosure [Text Block]

4. Derivative instruments and hedging activities:


Foreign currency forward contracts


In October 2012, the Company entered into a hedging program with a Canadian chartered bank to limit the potential foreign exchange fluctuations in its future cash flows related to a portion of payroll, rent and payments to a Canadian domain name registry supplier that are denominated in Canadian dollars and are expected to be paid by its Canadian operating subsidiary. As part of its risk management strategy, the Company uses derivative instruments to hedge a portion of the foreign exchange risk associated with these costs. The Company does not use these forward contracts for trading or speculative purposes. These forward contracts typically mature between one and eighteen months from the acquisition date.


The Company has 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 ASC Topic 815, the Company has been able to conclude that changes in fair value or cash flows attributable to the risk of 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 contracts have been included within other comprehensive income. The fair value of the contracts, as of June 30, 2014, is recorded as derivative instrument liabilities.


As of June 30, 2014, the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars was $13.5 million, of which $10.5 million met the requirements of ASC Topic 815 and were designated as hedges (June 30, 2013 - $18.1 million of which $15.1 million were designated as hedges). As of June 30, 2014, the Company has forward contracts with a notional amount of $3.0 million, which are not accounted for as hedges. The change in fair value of $0.2 million for these contracts is recorded on the statement of operations.


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 six months ended June 30, 2014, were as follows (amounts presented do not include any income tax effects).


Fair value of derivative instruments in the consolidated balance sheets


       

As of

June 30, 2014

   

As of

December 31, 2013

 

Derivatives

 

Balance Sheet
Location

 

Fair Value

Asset

(Liability)

   

Fair Value

Asset

(Liability)

 
                     

Foreign currency forward contracts designated as cash flow hedges

 

Derivative instruments

  $ (45,886

)

  $ (118,505

)

                     

Foreign currency forward contracts not designated as cash flow hedges

 

Derivative instruments

  $ (13,191

)

  $ (372,593

)

                     

Total foreign currency forward contracts

 

Derivative instruments

  $ (59,077

)

  $ (491,098

)


Effects of derivative instruments on income and other comprehensive income (OCI) for the three months ended June 30, 2014and June 30, 2013 are as follows:


Derivatives 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)

 
                                   

Foreign currency forward contracts for the three months ended June 30, 2014

  $ 430,277  

Operating expenses

  $ (200,756

)

    —       —  
         

Cost of revenues

  $ (31,457

)

               

Foreign currency forward contracts for the three months ended June 30, 2013

  $ (260,941

)

Operating expenses

  $ —       —       —  
         

Cost of revenues

  $ —                  

Effects of derivative instruments on income and other comprehensive income (OCI) for the six months ended June 30, 2014 and June 30, 2013 are as follows:


Derivatives 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)

 
                                   

Foreign currency forward contracts for the six months ended June 30, 2014

  $ 214,810  

Operating expenses

  $ (506,138

)

    —       —  
         

Cost of revenues

  $ (72,101

)

               

Foreign currency forward contracts for the six months ended June 30, 2013

  $ (446,726

)

Operating expenses

  $ —       —       —  
         

Cost of revenues

  $ —                  

In addition to the above, for those foreign currency forward contracts not designated as hedges, the Company has recorded a loss of $0.1 million upon settlement and a gain of $0.2 million for the change in fair value of outstanding contracts for the three months ended June 30, 2014, in the consolidated statement of operations and comprehensive income. The Company has recorded a loss of $0.2 million upon settlement and a gain of $0.1 million for the change in fair value of outstanding contracts for the six months ended June 30, 2014, in the consolidated statement of operations and comprehensive income.