Logitech 2012 Annual Report Download - page 258

LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table presents the amounts of gains and losses on the Company’s derivative instruments
for the fiscal years ended March 31, 2012 and 2011 and their locations on its Consolidated Financial Statements
(in thousands):
Net amount of
gain/(loss)
deferred as a
component of
accumulated
other
comprehensive
loss
Location of
gain/(Loss)
reclassified from
accumulated other
comprehensive
loss into income
Amount of
gain/(loss)
reclassified
from
accumulated
other
comprehensive
loss into
income
Location of
gain/(loss)
recognized in
income
immediately
Amount of gain/
(loss) recognized
in income
immediately
2012 2011 2012 2011 2012 2011
Derivatives designated as
hedging instruments:
Cash Flow Hedges ...... $2,916 $(4,366)
Cost of goods
sold $(421) $6,078
Other income/
expense $ (198) $ (5)
2,916 (4,366) (421) 6,078 (198) (5)
Derivatives not designated as
hedging instruments:
Foreign Exchange
Forward Contracts ... — — — —
Other income/
expense (350) 855
Foreign Exchange Swap
Contracts........... — — — —
Other income/
expense (1,884) (2,865)
— — — — (2,234) (2,010)
$2,916 $(4,366) $(421) $6,078 $ (2,432) $ (2,015)
Cash Flow Hedges
The Company enters into foreign exchange forward contracts to hedge against exposure to changes in foreign
currency exchange rates related to its subsidiaries’ forecasted inventory purchases. The primary risk managed
by using derivative instruments is the foreign currency exchange rate risk. The Company has designated these
derivatives as cash flow hedges. Logitech does not use derivative financial instruments for trading or speculative
purposes. These hedging contracts mature within four months, and are denominated in the same currency as the
underlying transactions. Gains and losses in the fair value of the effective portion of the hedges are deferred as a
component of accumulated other comprehensive loss until the hedged inventory purchases are sold, at which time
the gains or losses are reclassified to cost of goods sold. The Company assesses the effectiveness of the hedges
by comparing changes in the spot rate of the currency underlying the forward contract with changes in the spot
rate of the currency in which the forecasted transaction will be consummated. If the underlying transaction being
hedged fails to occur or if a portion of the hedge does not generate offsetting changes in the foreign currency
exposure of forecasted inventory purchases, the Company immediately recognizes the gain or loss on the associated
financial instrument in other income (expense). Such gains and losses were immaterial during the fiscal years
ended March 31, 2012, 2011 and 2010. Cash flows from such hedges are classified as operating activities in the
consolidated statements of cash flows. The notional amounts of foreign exchange forward contracts outstanding
related to forecasted inventory purchases were $58.1 million (A43.5 million) and $54.9 million (A38.7 million)
at March 31, 2012 and 2011. The notional amount represents the future cash flows under contracts to purchase
foreign currencies.
Note 8 — Financial Instruments (Continued)
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