Tucows 2012 Annual Report Download - page 46

Download and view the complete annual report

Please find page 46 of the 2012 Tucows annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 108

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108

41
Amortization of intangible assets consists of amounts arising in connection with the acquisition of
Mailbank.com Inc. in June 2006, the acquisition of Innerwise, Inc. in July 2007 and the acquisition of EPAG in August
2011.
The brand and customer relationships acquired in connection with the acquisitions of Boardtown Corporation,
Innerwise Inc. and EPAG are being amortized on a straight-line basis over seven years.
Customer relationships acquired in connection with the acquisition of Mailbank.com Inc. are amortized on a
straight-line basis over five years.
Technology acquired in connection with the acquisition of EPAG is amortized on a straight-line basis over two
years.
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.
As we do not comply with the documentation requirements for hedge accounting on certain of our foreign
exchange contracts, we account for the fair value of the derivative instruments on these contracts within the consolidated
balance sheet as a derivative financial asset or liability and the corresponding change in fair value is recorded in the
consolidated statement of operations.
Year ended December 31,
2012 2011
Loss (gain) on currency forward contracts $(682,851) $ 535,223
(Decrease) increase over prior period $(1,218,074)
(Decrease) /increase - percentage (228)%
Percentage of net revenues (1)% 1%
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 April 2014. The impact of the fair value
adjustment on unrealized foreign exchange on these contracts for Fiscal 2012 was a net gain of $1.1 million compared to
a net loss of $1.5 million for Fiscal 2011. This impact of the fair value adjustment on unrealized foreign exchange on
these contracts was partially offset by a realized loss upon settlement of currency forward contracts of $0.4 million for
Fiscal 2012 and a realized gain of $1.0 million for Fiscal 2011.
At December 31, 2012, our balance sheet reflects a derivative instrument asset of $0.4 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,
2012 2011
Other income (expense), net $336,848 $ 324,573
Increase over prior period $12,275
Increase - percentage 4 %
Percentage of net revenues 0 % 0%
Other income for Fiscal 2012 increased by $12,000, to $0.3 million, as compared with Fiscal 2011. This
primarily resulted from our selling certain intangible assets with no book value for $0.5 million during Fiscal 2012. This
increase was partially offset by the $0.4 million we received during Fiscal 2011 from the third party who is
commercializing the Infonautics patents we assigned to them in 2002, undertaking a routine audit of one of their
licensees.