Incredimail 2010 Annual Report Download - page 112

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INCREDIMAIL LTD AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In order to reduce the impact of changes in foreign currency exchange rates on its results, the Company enters into foreign
currency exchange forward contracts and options contracts to purchase and sell foreign currencies to hedge a portion of its
foreign currency net exposure resulting from payroll expenses denominated in NIS.
The foreign currency exchange forward contracts and options contracts are not designated as hedging instruments under hedge
accounting. These instruments are generally short term in nature, with typical maturities of less than one year, and are subject to
fluctuations in foreign exchange rates. Gains or losses on these derivatives, which partially offset the foreign currency impact
from the underlying exposures, were classified into financial income (expenses), net and amounted to $130,000, $(25,000) and
$69,000 for the years ended December 31, 2008, 2009 and 2010, respectively.
The Company’s derivatives expose it to credit risks from possible non-
performance by counterparties. The maximum amount of
loss due to credit risk that the Company would incur if counterparties to the derivative financial instruments failed completely to
perform according to the terms of the contracts, based on the gross fair value of the Company’
s derivative contracts that are
favorable to the Company, was approximately $27,000, presented as part of other receivables and prepaid expenses, as of
December 31, 2010. The Company has limited its credit risk by entering into derivative transactions exclusively with investment-
grade rated financial institutions and monitors the creditworthiness of these financial institutions on an ongoing basis.
The notional amounts of the Company’
s derivative instruments as of December 31, 2010 amounted to $1,950,000. Notional
values are U.S. dollar translated and calculated based on forward rates for forward contracts and based on spot rates for options.
Gross notional amounts do not quantify risk or represent assets or liabilities of the Company, but are used in the calculation of
settlements under the contracts.
Total revenues from external customers divided on the basis of the Company's product lines are as follows:
NOTE 12:
-
DERIVATIVE FINANCIAL INSTRUMENTS
NOTE 13:
-
PRODUCT LINES
Year ended December 31,
2008
2009
2010
U.S. dollars in thousands
Search
$
11,745
$
20,011
$
22,792
Software license
3,609
2,451
1,822
Anti
-
spam and content database subscriptions
5,549
4,266
3,582
Advertising, collaborations and other
1,003
467
1,301
$
21,906
$
27,195
$
29,497
F
-
29