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DERIVATIVES | 12 Months Ended
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Dec. 31, 2017
DERIVATIVES | NOTE G — DERIVATIVES The Company is a party to interest rate swap agreements with an aggregate notional amount of $5.3 million to manage interest rate exposure in connection with its variable interest rate borrowings. The hedge periods of these agreements commenced in March 2013 and expire in June 2018 and the notional amounts amortize over these periods. The interest rate swap agreements were designated as cash flow hedges under ASC Topic No. 815. The effective portion of the fair value gain or loss on these agreements is recorded as a component of accumulated other comprehensive loss. The Company has also entered into foreign exchange contracts, primarily to offset the earnings impact related to fluctuations in foreign currency exchange rates associated with inventory purchases denominated in foreign currencies. The aggregate gross notional amount of foreign exchange contracts at December 31, 2017 was $34.9 million. These foreign exchange contracts have not been designated as hedges as required in order to apply hedge accounting. The changes in the fair value of these contracts are recorded in earnings immediately. The fair values of the Company’s derivative financial instruments included in the consolidated balance sheets are presented as follows (in thousands):
|  |  |  | December 31, |
Derivatives designated as hedging instruments |  | Balance Sheet Location |  | 2017 |  |  | 2016 |
Interest rate swaps |  | Prepaid expenses |  | $ | 11 |  |  | $ | — |
|  | Accrued expenses |  |  | — |  |  |  | 4 |
|  | Deferred rent & other long-term liabilities |  |  | — |  |  |  | 3 |
|  |  |  | December 31, |
Derivatives not designated as hedging instruments |  | Balance Sheet Location |  | 2017 |  |  | 2016 |
Foreign exchange contracts |  | Prepaid expenses and other current assets |  | $ | — |  |  | $ | 924 |
|  | Accrued Expenses |  |  | 1,951 |  |  |  | — |
The fair value of the derivatives have been obtained from the counterparties to the agreements and were based on Level 2 observable inputs using proprietary models and estimates about relevant future market conditions. The amounts of the gains and losses related to the Company’s derivative financial instruments designated as hedging instruments are recognized in other comprehensive income (loss) as follows (in thousands):
|  | Year ended December 31, |
Derivatives designated as hedging instruments |  | 2017 |  |  | 2016 |  |  | 2015 |
Interest rate swaps |  | $ | 17 |  |  | $ | 17 |  |  | $ | (2 | )
As of December 31, 2017, no amounts recorded in accumulated other comprehensive loss were expected to be reclassified to interest expense in the next twelve months, however; in connection with the financing transaction described in Note O, the Company determined it is probable that the hedged forecast transaction will not occur and the net gain reported in accumulated other comprehensive income related to the interest rate swap will be reclassified into interest expense. The amounts of the gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments are recognized in earnings as follows (in thousands):
Derivatives not designated as hedging instruments |  | Location of Gain or (Loss) |  | Year Ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Foreign exchange contracts |  | Selling, general and administrative expense |  | $ | (2,592 | ) |  | $ | 2,182 |  |  | $ | 272 |

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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