XML 30 R15.htm IDEA: XBRL DOCUMENT v3.7.0.1
Note 7 - Derivative Instruments and Hedging Activities
 12 Months Ended
Dec. 31, 2016
Notes to Financial Statements  
Derivative Instruments and Hedging Activities Disclosure [Text Block]
7
. 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.
 For certain contracts, 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 and 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
December
 
31,
 
2016
and
2015,
is recorded as derivative instrument assets or liabilities. For certain contracts where the hedged transactions are no longer probable to occur, the loss on the associated forward contract is recognized in earnings
.
 
 
As of
December
31,
2016,
the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars was
$26.6
 million, of which
$24.0
 million met the requirements of ASC Topic
815
and were designated as hedges
(December
31,
2015
-
$24.0
 million, of which
$20.3
 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 year ended
December
 
31,
 
2016,
were as follows (amounts presented do not include any income tax effects).
 
 
Fair value of derivative instruments in the consolidated balance sheets (see note
6
)
 
Derivatives
Balance Sheet
Location
  
December 31,
201
6

Assets at
Fair Value
    
December 31,
201
5

Liabilities at
Fair Value
  
                   
Foreign currency forward contracts designated as cash flow hedges
Derivative instruments
   $
155,560
     $
(1,721,683
)
                   
Foreign currency forward contracts not designated as cash flow hedges
Derivative instruments
   $
17,328
     $
(305,403
)
                   
Total foreign currency forward contracts
Derivative instruments
   $
172,888
     $
(2,027,086
)
 
Movement in AOCI balance for the year ended
Dec
ember
31,
2016
 
   
Gains and
losses on cash
flow hedges
    
Tax impact
    
Total AOCI
  
                         
Opening AOCI balance
– December 31, 2015
   $
(1,721,683
)
   $
612,231
     $
(1,109,452
)
                         
Other comprehensive income (loss) before reclassifications
    
871,925
      
(304,109
)
    
567,816
  
Amount reclassified from accumulated other comprehensive income
    
1,005,318
      
(364,528
)
    
640,790
  
Other comprehensive income (loss) for the year ended December 31,
2016
    
1,877,243
      
(668,637
)
    
1,208,606
  
                         
Ending AOCI balance
– December 31, 2016
   $
155,560
     $
(56,406
)
   $
99,154
  
 
Movement in AOCI balance for the year ended
December
31,
201
5
 
   
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
    
(3,171,740
)
    
1,140,275
      
(2,031,465
)
Amount reclassified from accumulated other comprehensive income
    
2,396,733
      
(852,279
)
    
1,544,454
  
Other comprehensive income (loss) for the year ended December 31, 2015
    
(775,007
)
    
287,996
      
(487,011
)
                         
Ending AOCI balance
– December 31, 2015
   $
(1,721,683
)
   $
612,231
     $
(1,109,452
)
 
Movement in AOCI balance for the year ended
December
31,
201
4
 
   
Gains and
losses on cash
flow hedge
s
    
Tax impac
t
    
Total AOC
I
  
                         
Opening AOCI balance –
 December 31, 2013
   $
(372,593
 )   $
127,612
     $
(244,981
 )
                         
Other comprehensive income (loss) before reclassification
s
    
(1,527,171
 )    
523,056
      
(1,004,115
 )
Amount reclassified from accumulated other comprehensive incom
e
    
953,088
      
(326,433
 )    
626,655
  
Other
comprehensive income (loss) for the year ended December 31, 2014
    
(574,083
 )    
196,623
      
(377,460
 )
                         
Ending AOCI balance 
– December 31, 2014
   $
(946,676
 )   $
324,235
     $
(622,441
 )
 
Effects of derivative
instruments on income and other comprehensive income (OCI)
 
Derivatives in Cash Flow
Hedging Relationship
  
Amount of Gain or (Loss) Recognized in OCI, net of tax, 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
  
                             
     
 
  
Operating expenses
   $
(736,616
)
 
    
 
  
Foreign currency forward contracts
– year ended December 31, 2016
   $
1,208,606
  
Cost of revenues
   $
(221,460
)
Operating expenses
   $
(47,242
)
                             
     
 
  
Operating expenses
   $
(1,870,818
)
 
    
 
  
Foreign currency forward contracts
– year ended December 31, 2015
   $
(487,011
)
Cost of revenues
   $
(525,916
)
Operating expenses
   $
(294,113
)
                             
     
 
  
Operating expense
s
   $
(704,42
7
 )
 
    
 
  
Foreign currency forward contracts 
– year ended December 31, 2014
   $
(377,46
0
 )
Cost of revenue
s
   $
(248,66
2
 )
Operating expenses
 
   $
(20,53
5
 )
 
In addition to the above, for those foreign currency forward contracts not designated as hedges, the Company has recorded a loss of
$0.2
 million upon settlement and a gain of
$0.3
 million for the change in fair value of outstanding contracts for the year ended
December
 
31,
 
2016,
in the consolidated statement of comprehensive income. The Company has recorded a loss of
$0.5
 million upon settlement and a loss of
$0.1
million for the change in fair value of outstanding contracts for the year ended
December
 
31,
 
2015,
in the consolidated statement of comprehensive income. The Company has recorded a loss of
$0.3
 million upon settlement and a loss of
$50,000
for the change in fair value of outstanding contracts for the year ended
December
 
31,
 
2014,
in the consolidated statement of comprehensive income
.