Priceline 2014 Annual Report Download - page 101

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In the normal course of business, the Company is exposed to the impact of foreign currency fluctuations. The Company limits these
risks by following established risk management policies and procedures, including the use of derivatives. See Note 2 for further information on
our accounting policy for derivative financial instruments.
Derivatives Not Designated as Hedging Instruments — The Company is exposed to adverse movements in currency exchange rates as
the operating results of its international operations are translated from local currency into U.S. Dollars upon consolidation. The Company's
derivative contracts principally address short-term foreign exchange fluctuations for the Euro and British Pound Sterling versus the U.S. Dollar.
As of December 31, 2014 and 2013 , there were no outstanding derivative contracts related to foreign currency translation risk. Foreign
exchange gains of $13.7 million , $0.3 million and $0.7 million for the years ended December 31, 2014 , 2013 and 2012 , respectively, were
recorded related to these derivatives in "Foreign currency transactions and other" in the Consolidated Statements of Operations.
The Company also enters into foreign currency forward contracts to hedge its exposure to the impact of movements in currency
exchange rates on its transactional balances denominated in currencies other than the functional currency. Foreign exchange derivatives
outstanding as of December 31, 2014 associated with foreign currency transaction risks resulted in a net asset of $0.2 million , with an asset in
the amount of $0.3 million recorded in "Prepaid expenses and other current assets" and a liability in the amount of $0.1 million recorded in
"Accrued expenses and other current liabilities" on the Consolidated Balance Sheet. Foreign exchange derivatives outstanding at December 31,
2013 associated with foreign exchange transaction risks resulted in a net liability of $0.5 million , with a liability in the amount of $0.6 million
recorded in "Accrued expenses and other current liabilities" and an asset in the amount of $0.1 million recorded in "Prepaid and other current
assets" on the Consolidated Balance Sheet. Derivatives associated with these transaction risks resulted in foreign exchange losses of $21.8
million compared to foreign exchange gains of $3.6 million and $0.8 million for the years ended December 31, 2014 , 2013 and 2012 ,
respectively. These mark-to-market adjustments on the derivative contracts, offset by the effect of changes in currency exchange rates on
transactions denominated in currencies other than the functional currency, resulted in net losses of $11.8 million , $5.5 million and $5.5 million
for the years ended December 31, 2014 , 2013 and 2012 , respectively. These net impacts are reported in “Foreign currency transactions and
other” on the Consolidated Statements of Operations.
The settlement of derivative contracts not designated as hedging instruments for the year ended December 31, 2014 resulted in a net
cash outflow of $8.9 million , compared to net cash inflows of $4.4 million and $1.9 million for the years ended December 31, 2013 and 2012 ,
respectively, and were reported within "Net cash provided by operating activities" on the Consolidated Statements of Cash Flows.
Derivatives Designated as Hedging Instruments — The Company had no foreign currency forward contracts designated as hedges of its
net investment in a foreign subsidiary outstanding as of December 31, 2014 . As of December 31, 2013 , the Company had outstanding foreign
currency forward contracts with a notional value of 3.0 billion Euros to hedge a portion of its net investment in a foreign subsidiary. These
contracts were all short-term in nature. Hedge ineffectiveness is assessed and measured based on changes in forward exchange rates. The fair
value of these derivatives at December 31, 2013 was a net liability of $121.3 million , with a liability in the amount of $121.5 million
recorded in
"Accrued expenses and other current liabilities" and an asset in the amount of $0.2 million recorded in "Prepaid expenses and other current
assets" on the Consolidated Balance Sheet. These hedging instruments generated net cash outflows of $80.3 million and $78.6 million for the
years ended
December 31, 2014 and 2013 , compared to a net cash inflows of $82.1 million for the year ended December 31, 2012 , and were
reported within "Net cash used in investing activities" on the Consolidated Statements of Cash Flows.
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