Netgear 2012 Annual Report Download - page 78

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Table of Contents NETGEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company did not recognize any
net gain or loss related to the ineffective portion of cash flow hedges during the years ended December 31,
2012 , 2011 and 2010 .
Non-designated hedges
The Company enters into non-designated hedges under the authoritative guidance for derivatives and hedging to manage the exposure of non-
functional currency monetary assets and liabilities held on its financial statements to fluctuations in foreign currency exchange rates, as well as to
reduce volatility in other income and expense. The non-designated hedges are generally expected to offset the changes in value of its net non-
functional currency asset and liability position resulting from foreign exchange rate fluctuations. Foreign currency denominated accounts receivable
and payable are hedged with non-designated hedges when the related anticipated foreign revenue and expenses are recognized in the Company’
s
financial statements. The Company also hedges certain non-
functional currency monetary assets and liabilities that may not be incorporated into the
cash flow hedge program. The Company adjusts its non-designated hedges monthly and enters into about 12 non-
designated derivatives per quarter.
The average size of its non-designated hedges is about $2 million USD equivalent and these hedges normally range from one to five
months in
duration.
74
Derivatives Designated as
Hedging Instruments
Year Ended December 31, 2011
Gain or (Loss)
Recognized in
OCI -
Effective
Portion (a)
Location of
Gain or (Loss)
Reclassified
from OCI
into Income -
Effective
Portion
Gain or (Loss)
Reclassified
from
OCI into
Income -
Effective
Portion (a)
Location of
Gain or (Loss)
Recognized in
Income and
Excluded from
Effectiveness Testing
Amount of Gain or
(Loss) Recognized in
Income and
Excluded from
Effectiveness Testing
Cash flow hedges:
Foreign currency forward contracts
542
Net revenue
967
Other income
(expense), net
$
(310
)
Foreign currency forward contracts
—
Cost of revenue
(4
)
Other income
(expense), net
—
Foreign currency forward contracts
—
Operating
expenses
(154
)
Other income
(expense), net
—
Total
542
809
$
(310
)
Derivatives Designated as
Hedging Instruments
Year Ended December 31, 2010
Gain or (Loss)
Recognized in
OCI -
Effective
Portion (a)
Location of
Gain or (Loss)
Reclassified
from OCI
into Income -
Effective
Portion
Gain or (Loss)
Reclassified
from
OCI into
Income -
Effective
Portion (a)
Location of
Gain or (Loss)
Recognized in
Income and
Excluded from
Effectiveness Testing
Amount of Gain or
(Loss) Recognized in
Income and
Excluded from
Effectiveness Testing
Cash flow hedges:
Foreign currency forward contracts
2,257
Net revenue
2,755
Other income
(expense), net
$
(261
)
Foreign currency forward contracts
—
Cost of revenue
(27
)
Other income
(expense), net
—
Foreign currency forward contracts
—
Operating
expenses
(724
)
Other income
(expense), net
—
Total
2,257
2,004
$
(261
)
(a) Refer to Note 10, Stockholders' Equity
, which summarizes the cumulative other comprehensive income activity related to derivatives.