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Note 5 - Derivative Instruments and Hedging Activities
 9 Months Ended
Sep. 30, 2019
Notes to Financial Statements  
Derivative Instruments and Hedging Activities Disclosure [Text Block]
5
. 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 and foreign currency denominated liabilities under ASC Topic 
815,
Derivatives and Hedging
(“ASC
815”
). For certain contracts, as the critical terms of the hedging instrument and the entire hedged forecasted transaction are the same in accordance with ASC
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. Unrealized gains or losses on these contracts have been included within other comprehensive income (“OCI”). The fair value of the contracts, as of
September 30, 2019,
is recorded as derivative instrument assets or liabilities. As a result of adopting the targeted improvements on
January 1, 2019,
for any existing contracts on the effective date of adoption and thereafter, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness will be recorded in OCI.
 
As of
September 30, 2019,
the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars was
$10.3
 million, of which
$9.9
 million were designated as hedges. As of
December 31, 2018,
the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars was
$40.5
 million, of which
$36.5
 million were designated as hedges.
 
Maturity date (Dollar amounts in thousands of U.S. dollars)
  
Notional
amount of
U.S. dollars
    
Weighted average
exchange rate of
U.S. dollars
    
Fair Value
  
                         
October - December 2019
    
10,327
      
1.3174
      
(41
 )
    $
10,327
     $
1.3174
     $
(41
 )
  
Fair value of derivative instruments and effect of derivative instruments on financial performance
 
 
The effect of these derivative instruments on our consolidated financial statements were as follows (amounts presented do
not
include any income tax effects).
 
Fair value of derivative instruments in the consolidated balance sheets
 
Derivatives (Dollar amounts in thousands of U.S. dollars)
Balance Sheet Location
  
As of September 30,
2019
Fair Value
Asset
   
As of December 31,
2018
Fair Value
Liability
  
Foreign Currency forward contracts designated as cash flow hedges (net)
Derivative instruments
   $
(39
 )   $
(1,069
 )
Foreign Currency forward contracts not designated as cash flow hedges (net)
Derivative instruments
    
(2
 )    
(207
 )
Total foreign currency forward contracts (net)
Derivative instruments
   $
(41
 )   $
(1,276
 )
 
Movement in
accumulated other comprehensive income (“
AOCI
”)
balance for the
three
months ended
September
3
0
,
201
9
(Dollar amounts in thousands of U.S. dollars)
:
 
   
Gains and losses on
cash flow hedges
    
Tax impact
    
Total AOCI
  
Opening AOCI balance - June 30, 2019
   $
159
     $
(39
 )   $
120
  
Other comprehensive income (loss) before reclassifications
    
(231
 )    
56
      
(175
 )
Amount reclassified from AOCI
    
35
      
(9
 )    
26
  
Other comprehensive income (loss) for the three months ended September 30, 2019
    
(196
 )    
47
      
(149
 )
                         
Ending AOCI Balance - September 30, 2019
   $
(37
 )   $
8
     $
(29
 )
 
 Movement in AOCI balance for the
nine
months ended
September
30,
2019
(Dollar amounts in thousands of U.S. dollars)
:
 
   
Gains and losses on
cash flow hedges
    
Tax impact
    
Total AOCI
  
Opening AOCI balance - December 31, 2018
   $
(1,069
 )   $
259
     $
(810
 )
Other comprehensive income (loss) before reclassifications
    
812
      
(198
 )    
614
  
Amount reclassified from AOCI
    
220
      
(53
 )    
167
  
Other comprehensive income (loss) for the nine months ended September 30, 2019
    
1,032
      
(251
 )    
781
  
                         
Ending AOCI Balance - September 30, 2019
   $
(37
 )   $
8
     $
(29
 )
 
Effects of derivative instruments on income and OCI for the
three
months ended
September
3
0
,
201
9
are as follows
(Dollar amounts in thousands of U.S. dollars):
 
Derivatives in Cash Flow Hedging Relationship
  
Amount of Gain or
(Loss) Recognized in
OCI, net of tax, on
Derivative
  
Location of Gain
or (Loss)
Reclassified from
AOCI into
Income
(Effective
Portion)
  
Amount of Gain or
(Loss) Reclassified
from AOCI 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)
  
     
 
  
Operating expenses
   $
(28
 )   $
-
     $
-
  
Foreign currency forward contracts for the three months ended September 30, 2019
   $
(149
 )
Cost of revenues
   $
(7
 )   $
-
     $
-
  
                                   
     
 
  
Operating expenses
   $
(71
 )   $
-
     $
-
  
Foreign currency forward contracts for the three months ended September 30, 2018
   $
207
  
Cost of revenues
   $
(12
 )   $
-
     $
-
  
 
Effects of derivative instruments on income and OCI for the
nine
months ended
September
3
0
,
2019
are as follows
(Dollar amounts in thousands of U.S. dollars):
 
Derivatives in Cash Flow Hedging Relationship
  
Amount of Gain or
(Loss) Recognized in
OCI, net of tax, on
Derivative
  
Location of Gain
or (Loss)
Reclassified from
AOCI into
Income
(Effective
Portion)
  
Amount of Gain or
(Loss) Reclassified
from AOCI 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)
  
     
 
  
Operating expenses
   $
(182
 )   $
-
     $
-
  
Foreign currency forward contracts for the nine months ended September 30, 2019
   $
781
  
Cost of revenues
   $
(38
 )   $
-
     $
-
  
                                   
     
 
  
Operating expenses
   $
(87
 )   $
-
     $
-
  
Foreign currency forward contracts for the nine months ended September 30, 2018
   $
(36
 )
Cost of revenues
   $
(13
 )   $
-
     $
-
  
 
In addition to the above, for those foreign currency forward contracts
not
designated as hedges, the Company recorded the following fair value adjustments on settled and outstanding contracts (Dollar amounts in thousands of U.S. dollars):
 
   
September 30, 2019
  
September 30, 2018
  
Forward currency contracts not designated as hedges:
  
Three months ended
  
Nine months ended
  
Three months ended
  
Nine months ended
  
                     
Gain (loss) on settlement
  
less than ($0.1)
   $
(0.1)
  
less than ($0.1)
  
less than ($0.1)
  
                     
Gain (loss) on change in fair value
  
less than $0.1
   $
0.2
  
less than $0.1
  
less than ($0.1)