Tucows 2015 Annual Report Download - page 108

LOSS (GAIN) ON CURRENCY FORWARD CONTRACTS
Although our functional currency is the U.S. dollar, a major portion of our fixed expenses are incurred in
Canadian dollars. Our goal with regard to foreign currency exposure is, to the extent possible; to achieve operational cost
certainty, manage financial exposure to certain foreign exchange fluctuations and to neutralize some of the impact of
foreign currency exchange movements. Accordingly, we enter into foreign exchange contracts to mitigate the exchange
rate risk on portions of our Canadian dollar exposure.
Year ended December 31,
2014 2013
Loss on currency forward contracts $ 357,760 357,109
Increase over prior period $ 651
Increase - percentage 0%
Percentage of net revenues 0% 0%
We have entered into certain forward exchange contracts that do not comply with the requirements of hedge
accounting to meet a portion of our future Canadian dollar requirements through December 2015. The impact of the fair
value adjustment on outstanding contracts for Fiscal 2014 was a net loss of $0.1 million, compared to $0.5 million for
Fiscal 2013. The impact of the fair value adjustment on outstanding contracts was increased by a realized loss upon
settlement of currency forward contracts of $0.3 million for Fiscal 2014 compared to a realized gain of $0.1 million for
Fiscal 2013.
At December 31, 2014, our balance sheet reflects a derivative instrument liability of $1.1 million as a result of our
existing foreign exchange contracts. Until their respective maturity dates, these contracts will fluctuate in value in line with
movements in the Canadian dollar relative to the U.S. dollar.
OTHER INCOME AND EXPENSES
Year ended December 31,
2014 2013
Other income (expense), net $ (206,730) $ (354,857)
Increase over prior period $ 148,127
Increase - percentage (42)%
Percentage of net revenues 0 %(0)%
Other expenses for Fiscal 2014 which primarily consist of interest we incur in connection with our credit facility
with the Bank of Montreal, decreased by $0.2 million, to $0.2 million, as compared with Fiscal 2013.
INCOME TAXES
The following table presents our provision for income taxes for the periods presented:
Year ended December 31,
2014 2013
Provision for income taxes $ 3,054,229 1,619,339
Increase in provision over prior period $ 1,434,890
Increase - percentage 89%
Effective tax rate 32.4% 27.9%
We operate in various tax jurisdictions, and accordingly, our income is subject to varying rates of tax. Losses
incurred in one jurisdiction cannot be used to offset income taxes payable in another jurisdiction. Our ability to use income
tax loss carryforwards and future income tax deductions is dependent upon our operations in the tax jurisdictions in which
such losses or deductions arise. Income taxes are computed using the asset and liability method, under which deferred tax
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