Derivatives and Hedging |
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| Derivatives and Hedging | 18.Derivatives and Hedging Certain of the Company’s foreign operations expose the Company to fluctuations of foreign exchange rates. These fluctuations may impact the value of the Company’s cash receipts and payments in terms of the functional currency of the transacting party. The Company’s primary exposure results from the foreign currency impact of intercompany sales of inventory to regional entities by the Company’s centralized procurement legal entity. These intercompany sales are denominated in the functional currency of the regional entities, primarily the Euro, the British Pound, and the Australian dollar, while the functional currency of the centralized procurement legal entity is the U.S. dollar. This introduces foreign exchange risk on the revenues recorded for such intercompany sales. The Company enters into foreign currency forward contracts to manage its exposure to fluctuations in foreign exchange rates. These contracts are entered into with large, reputable financial institutions that are monitored for counterparty credit risks. For the Company’s foreign currency forward contracts that are designated and qualify as cash flow hedges, the gains or losses on the effective portion of such hedges are recorded in accumulated other comprehensive income and subsequently reclassified in the period during which the hedged transaction affects earnings within revenue in the condensed consolidated statements of operations (i.e., when control of the inventory is passed to third-party customers and revenue is recognized). The change in fair value of the components excluded from the assessment of effectiveness, including changes in the spot-forward differential and counterparty non-performance risk, will also be recognized within revenue in the condensed consolidated statements of operations. The Company also has foreign currency forward contracts that are not designated as hedges and the changes in fair value of such derivatives are recognized in current period earnings. Cash Flow Hedges The fair value of the Company’s cash flow hedges as well as their classification on the condensed consolidated balance sheets as of March 31, 2026 and September 30, 2025 are as follows:
The gains or (losses) resulting from changes in fair value of the Company’s cash flow hedges recognized in accumulated other comprehensive income (loss) for the three and six months ended March 31, 2026 and 2025 are as follows:
The amounts recognized within “Revenue” in the condensed consolidated statements of operations with respect to the Company’s cash flow hedges for the three and six months ended March 31, 2026 and 2025 are as follows:
The following table details the changes in the cumulative impact of the gain (loss) on derivatives designated for hedge accounting for the six months ended March 31, 2026:
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