Logitech 2013 Annual Report Download - page 193

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, 2013 and 2012 and their locations on its consolidated statements of operations
(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
2013 2012 2013 2012 2013 2012
Derivatives designated as
hedging instruments:
Cash flow hedges . . . . . . . . . $ 566 $2,916
Cost of goods
sold $1,756 $ (421 )
Other income/
expense $ 275 $ (198)
566 2,916 1,756 (421) 275 (198)
Derivatives not designated as
hedging instruments:
Foreign exchange
forward contracts . . . . . . — — — —
Other income/
expense (848) (350)
Foreign exchange swap
contracts . . . . . . . . . . . . . — — — —
Other income/
expense 1,176 (1,884)
— — — — 328 (2,234)
$ 566 $2,916 $1,756 $ (421) $ 603 $(2,432)
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 Company has one entity
with a euro functional currency that purchases inventory in U.S. dollars. 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), net. Such gains and losses were immaterial during the fiscal years ended March 31, 2013,
2012 and 2011. 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 $38.5 million (€30.1 million) and $58.1 million (€43.5 million) at March 31, 2013 and 2012. The
notional amount represents the future cash flows under contracts to purchase foreign currencies.
Note 8 — Financial Instruments (Continued)
ANNUAL REPORT
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