Note 4 - Derivative Instruments and Hedging Activities |
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| Derivative Instruments and Hedging Activities Disclosure [Text Block] |
4. Derivative Instruments and Hedging Activities
The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed by using derivative instruments are foreign exchange rate risk and formerly interest rate risk.
Since October 2012, the Company has employed 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, taxes, 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. The Company does not use hedging forward contracts for trading or speculative purposes. The foreign exchange contracts typically mature between and months.
The Company has designated certain of these foreign exchange transactions as cash flow hedges of forecasted transactions under ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“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 being hedged are expected to completely offset at inception and on an ongoing basis. Accordingly, for the foreign exchange, unrealized gains or losses on the effective portion of these contracts were included within other comprehensive income and reclassified to earnings when the hedged transaction is settled. Cash flows from hedging activities were classified under the same category as the cash flows from the hedged items in the consolidated statements of cash flows. The fair value of the foreign exchange contract, as of March 31, 2025 and December 31, 2024, 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 March 31, 2025, the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars was $11.2 million, of which $11.2 million met the requirements of ASC Topic 815 and were designated as hedges.
As of December 31, 2024, the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars was $29.4 million, of which $29.4 million met the requirements of ASC Topic 815 and were designated as hedges.
As of March 31, 2025, we had the following outstanding forward contracts to trade U.S. dollars in exchange for Canadian dollars:
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
Movement in Accumulated other comprehensive income (AOCI) balance for the three months ended March 31, 2025 (Dollar amounts in thousands of U.S. dollars)
Effects of derivative instruments on income and OCI for the three months ended March 31, 2025 and 2024 are as follows (Dollar amounts in thousands of U.S. dollars)
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