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Note 6 - Derivative Instruments and Hedging Activities
 9 Months Ended
Sep. 30, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Disclosure [Text Block]

6. 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 incurred on its future cash flows related to a portion of payroll, rent and payments to Canadian domain name registry suppliers 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.


The Company has designated certain of these transactions as cash flow hedges of forecasted transactions under 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, 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 September 30, 2015, is recorded as derivative instrument liabilities.


As of September 30, 2015, the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars was $31.0 million, of which $26.4 million met the requirements of ASC Topic 815 and were designated as hedges (September 30, 2014 - $22.8 million of which $19.0 million were designated as hedges).


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 nine months ended September 30, 2015, were as follows (amounts presented do not include any income tax effects).


Fair value of derivative instruments in the consolidated balance sheets


Derivatives

   Balance Sheet
Location		  

As of

September 30,

2015

Fair Value

Asset

(Liability)

    

As of

December 31,

2014

Fair Value

Asset

(Liability)

  
                     

Foreign currency forward contracts not designated as cash flow hedges

  Derivative instruments   $ (329,523

)

   $ (169,129

)
                     

Foreign currency forward contracts designated as cash flow hedges

  Derivative instruments   $ (1,851,845

)

   $ (946,676

)
                     

Total foreign currency forward contracts

  Derivative instruments   $ (2,181,368

)

   $ (1,115,805

)

Movement in Accumulated Other Comprehensive Income ("AOCI") balance for the three months ended September 30, 2015:


   

Gains and

losses on cash

flow hedges

    

Tax impact

    

Total AOCI

  

Opening AOCI balance – June 30, 2015

   $ (1,293,175

)

   $ 459,851     $ (833,324

)
                         

Other comprehensive income (loss) before reclassifications

     (1,124,049

)

     399,713       (724,336

)

Amount reclassified from accumulated other comprehensive income

     565,379       (201,049

)

     364,330  

Other comprehensive income (loss) for the three months ended September 30, 2015

     (558,670

)

     198,664       (360,006

)
                         

Ending AOCI balance – September 30, 2015

   $ (1,851,845

)

   $ 658,515     $ (1,193,330

)

Movement in Accumulated Other Comprehensive Income ("AOCI") balance for the nine months ended September 30, 2015:


   

Gains and

losses on cash

flow hedges

    

Tax impact

    

Total AOCI

  

Opening AOCI balance – December 31, 2014

   $ (946,676

)

   $ 324,235     $ (622,441

)
                         

Other comprehensive income (loss) before reclassifications

     (2,693,436

)

     970,188       (1,723,248

)

Amount reclassified from accumulated other comprehensive income

     1,788,267       (635,908

)

     1,152,359  

Other comprehensive income (loss) for the nine months ended September 30, 2015

     (905,169

)

     334,280       (570,889

)
                         

Ending AOCI balance – September 30, 2015

   $ (1,851,845

)

   $ 658,515     $ (1,193,330

)

Effects of derivative instruments on income and other comprehensive income (OCI) for the three months ended September 30, 2015 and September 30, 2014 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 September 30, 2015          

Operating expenses

   $ (314,841

)

  

Operating expenses

     (84,312

)

 

   $ (360,006 ) 

 

Cost of revenues

     (49,489

)

  

Cost of revenues

   $ —

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

Operating expenses

   $ (40,112

)

  

Operating expenses

     —  

 

   $ (437,519 ) 

 

Cost of revenues

     (17,589

)

  

Cost of revenues

   $ —  

Effects of derivative instruments on income and other comprehensive income (OCI) for the nine months ended September 30, 2015 and September 30, 2014 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 nine months ended September 30, 2015          

Operating expenses

   $ (886,076

)

  

Operating expenses

     (115,635

)

 

   $ (570,889

)

  

Cost of revenues

     (266,284

)

  

Cost of revenues

   $ —

 
                                 
                                 
 Foreign currency forward contracts for the nine months ended September 30, 2014          

Operating expenses

   $ (321,136

)

  

Operating expenses

     —  

 

   $ (602,901

)

  

Cost of revenues

     (116,757

)

  

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 loss of $0.1 million for the change in fair value of outstanding contracts for the three months ended September 30, 2015, in the consolidated statement of operations and comprehensive income. The Company has recorded a loss of $25,000 upon settlement and a loss of $0.1 million for the change in fair value of outstanding contracts for the three months ended September 30, 2014, in the consolidated statement of operations and comprehensive income.


The Company has recorded a loss of $0.3 million upon settlement and a loss of $0.2 million for the change in fair value of outstanding contracts for the nine months ended September 30, 2015, in the consolidated statement of operations and comprehensive income. The Company has recorded a loss of $0.2 million upon settlement and a loss of $20,000 for the change in fair value of outstanding contracts for the nine months ended September 30, 2014, in the consolidated statement of operations and comprehensive income.