Incredimail 2013 Annual Report Download - page 112

PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
The fair value of the Company's stock options granted to employees and directors was estimated using the following
assumptions:
The Company accounts for derivatives and hedging based on ASC No. 815, "Derivatives and Hedging". ASC No. 815
requires the Company to recognize all derivatives on the balance sheet at fair value. The accounting for changes in the fair
value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a
hedging relationship and further, on the type of hedging relationship.
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.
These instruments were not designated as cash flow hedge as defined by ASC 815, "Derivative and Hedging" and,
therefore, the Company recognized the changes in fair value of these instruments in the statement of income as financial
income or expense, as incurred. Gains or losses on these derivatives, which partially offset the foreign currency impact
from the underlying exposures, and amounted to $ (25), $ 238 and $ 300 for the years ended December 31, 2011, 2012
and 2013, respectively.
The notional value of the Company’
s derivative instruments as of December 31, 2012 and 2013 amounted to $ 6,891 and
$ 2,500, respectively. 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. The Company measured the fair value
of these contracts in accordance with ASC No. 820 and they were classified as level 2.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Year ended December 31,
2011 2012 2013
Risk
-
free interest rate
2.23%
0.75%
1.04%
Expected volatility 47.31%-
65.27%
45.60%-
61.90%
45.57% -
57.42%
Weighted average volatility
56.29%
53.76%
51.49%
Expected term (years)
3.75
4.09
3.80
Dividend yield
0.00%
0.00%
0.00%
r.
Derivative instruments:
F
-
20