Tucows 2013 Annual Report Download - page 58

Total
$
26,540,000
1.0480
$
(491,098
)
As of December 31, 2013 the Company has $26.5 million of outstanding foreign exchange forward contracts which
will convert to CDN $27.8 million. Of these contracts, $20.6 million met the requirements for hedge accounting (2012 –
$15.1 million).
We have performed a sensitivity analysis model for foreign exchange exposure over the three months ended
December 31, 2013. The analysis used a modeling technique that compares the U.S. dollar equivalent of all expenses
incurred in Canadian dollars, at the actual exchange rate, to a hypothetical 10% adverse movement in the foreign currency
exchange rates against the U.S. dollar, with all other variables held constant. Foreign currency exchange rates used were
based on the market rates in effect during the three months ended December 31, 2013. The sensitivity analysis indicated that
a hypothetical 10% adverse movement in foreign currency exchange rates would result in a decrease in net income for the
three months ended December 31, 2013 of approximately $0.5 million. There can be no assurances that the above projected
exchange rate decrease will materialize. Fluctuations of exchange rates are beyond our control. We will continue to monitor
and assess the risk associated with these exposures and may take additional actions in the future to hedge or mitigate these
risks.
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Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash
equivalents, marketable securities, foreign exchange contracts and accounts receivable. Our cash, cash equivalents and short-
term investments are in high-quality securities placed with major banks and financial institutions whom we have evaluated as
highly creditworthy and commercial paper. Similarly, we enter into our foreign exchange contracts with major banks and
financial institutions. With respect to accounts receivable, we perform ongoing evaluations of our customers, generally
granting uncollateralized credit terms to our customers, and maintaining an allowance for doubtful accounts based on
historical experience and our expectation of future losses.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements and supplementary data required by this item are attached to this Annual
Report on Form 10-K beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Under the supervision of our Chief Executive Officer and Chief Financial Officer, our management conducted an
assessment of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based
on the results of such assessment, management have concluded that our disclosure controls and procedures as of the end of
the period covered by this report are effective.
Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting
for Tucows. There were no changes in our internal control over financial reporting during the year ended December 31, 2013
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues and instances of fraud, if any, within Tucows have been
detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future
conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the