Incredimail 2012 Annual Report Download - page 86

The fair value of firmly committed transactions denominated in currencies other than our functional currency, as of December 31, 2012,
was a liability of $238 thousand for less than one year and none for more than one year, all denominated in NIS.
The fair value of derivative instruments and the notional amount of the hedged instruments in NIS, as of December 31, 2012 were as
follows:
In addition, in territories where our prices are based on local currencies, fluctuations in the dollar exchange rate could affect our gross
profit margin. We may compensate for such fluctuations by changing product prices accordingly. We also hold a small part of our financial
investments in other currencies, mainly NIS and Euro. The dollar value of those investments may decline. A revaluation of 1% of the foreign
currencies (i.e. other than U.S. dollar) would not have a material effect on our income before taxes possibly reducing it by less than $0.1 million.
A majority of our costs, including salaries, expenses and office expenses are incurred in NIS. Inflation in Israel may have the effect of
increasing the U.S. dollar cost of our operations in Israel. If the U.S. dollar declines in value in relation to the New Israeli Shekel, it will become
more expensive for us to fund our operations in Israel. A revaluation of 1% of the New Israeli Shekel will affect our income before tax by less
than one percent (1%). The exchange rate of the U.S. dollar to the New Israeli Shekel, based on exchange rates published by the Bank of Israel,
was as follows:
Since 2006 we’
ve engaged a firm to analyze our exposure to the fluctuation in foreign currency exchange rates and are implementing
their recommendations since then. However, due to the market conditions, volatility and other factors, its proposals and their implementation
occasionally prove to be ineffective or can cause additional finance expenses.
Interest Rate Risk
. The primary objective of our investment activities is to preserve principal while maximizing the interest income we
receive from our investments, without increasing risk. Our current investment policy is to invest in dollar denominated or linked debentures, of
limited sums, rated "A" or higher and with an average maturity of no more than 3 years. We are exposed to market risks resulting from changes
in interest rates relating primarily to our financial investments in cash, deposits and marketable securities. We do not use derivative financial
instruments to limit exposure to interest rate risk. Our interest gains may decline in the future as a result of changes in the financial markets.
However, as interests rates are already very low, we believe any such potential loss would be immaterial to us.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
Notional
Amount
Fair Value
In thousands of U.S.
dollars
Zero
-
cost collar contracts to hedge payroll expenses
6,891
238
Year Ended December 31,
2010
2011
2012
Average rate for period
3.733
3.578
3.855
Rate at year
-
end
3.549
3.821
3.733
76