Incredimail 2011 Annual Report Download - page 81

A copy of each document (or a translation thereof to the extent not in English) concerning Perion that is referred to in this annual report on Form 20-
F, is
available for public view (subject to confidential treatment of agreements pursuant to applicable law) at our principal executive offices at Perion Network Ltd., 4
HaNechoshet Street, Tel-Aviv 69710, Israel.
I. SUBSIDIARY INFORMATION
Not applicable.
ITEM 11. QUANTIT AT IVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Exchange Rate Risk.
A significant portion of our revenues and expenses are in foreign currencies. As a result numerous balances are denominated or linked to
these currencies. Expense related to foreign currency fluctuations in 2010 was $ 45,000 and in 2011 foreign currency related fluctuations resulted in $102,000
financial income. These results are components of the exchange rate differences set forth in Note 12(a) of our financial statements.
As of December 31, 2011, balance sheet monetary
items in US dollars, our functional currency, and those currencies other than the US dollars were as
follows:
The fair value of firmly committed transactions denominated in currencies other than our functional currency, as of December 31, 2011, was a liability of $44
thousand for less than one year and none for more than one year, all denominated in New Israeli Shekels.
The fair value of derivative instruments and the notional amount of the hedged instruments in New Israeli Shekels, as of December 31, 2011 were as follows:
In addition, in territories where our prices are based on local currencies, fluctuations in the dollar exchange rate could affect our gross profit margin. We may
compensate for such fluctuations by changing product prices accordingly. We also hold a small part of our financial investments in other currencies, mainly New
Israeli Shekels and Euro. The dollar value of those investments may decline. A revaluation of 1% of the foreign currencies (i.e. other than U.S. dollar) would not have
a material on our income before taxes possibly reducing it by less than $0.1 million.
A majority of our costs, including salaries, expenses and office expenses are incurred in New Israeli Shekels. Inflation in Israel may have the effect of
increasing the U.S. dollar cost of our operations in Israel. If the U.S. dollar declines in value in relation to the New Israeli Shekel, it will become more expensive for us
to fund our operations in Israel. A revaluation of 1% of the New Israeli Shekel will affect our income before tax by less than one percent. The exchange rate of the
U.S. dollar to the New Israeli Shekel, based on exchange rates published by the Bank of Israel, was as follows:
US Dollars
New Israeli
Shekels
Other
Currencies
Total
In thousands of US dollars
Current assets
12,047
7,100
1,354
20,501
Long
-
term assets
204
484
-
688
Current liabilities
(19,401
)
(1,527
)
(83
)
(21,011
)
Long-term liabilities
(1,120
)
(946
)
-
(2,066
)
Total
(8,270
)
5,111
1,271
(1,888
)
Notional
Amount
Fair Value
In thousands of US dollars
Zero
-
cost collar contracts to hedge payroll expenses
4,300
(44
)
Year Ended December 31,
2009
2010
2011
Average rate for period
3.933
3.733
3.578
Rate at year
-
end
3.775
3.549
3.821
78