Under Armour 2013 Annual Report Download - page 54

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operating targets been deemed probable. As a result, if factors change and we use different assumptions, our
stock-based compensation expense could be materially different in the future. Refer to Note 2 and Note 12 to the
Consolidated Financial Statements for a further discussion on stock-based compensation.
Recently Issued Accounting Standards
In July 2013, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update
which requires that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented
in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar
tax loss, or a tax credit carryforward, with certain exceptions. This guidance is effective for annual and interim
reporting periods beginning after December 15, 2013, with early adoption permitted. We believe the adoption of
this pronouncement will not have a material impact on our consolidated financial statements.
Recently Adopted Accounting Standards
In February 2013, the FASB issued an Accounting Standards Update which requires companies to present
either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts
reclassified from each component of accumulated other comprehensive income based on its source and the
income statement line items affected by the reclassification. This guidance is effective for annual and interim
reporting periods beginning after December 15, 2012. The adoption of this pronouncement did not have a
material impact on our consolidated financial statements.
In July 2012, the FASB issued an Accounting Standards Update which allows companies to assess
qualitative factors to determine the likelihood of indefinite-lived intangible asset impairment and whether it is
necessary to perform the quantitative impairment test currently required. This guidance is effective for annual
and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption
permitted. The adoption of this pronouncement did not have an impact on our consolidated financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Foreign Currency Risk
We currently generate a majority of our consolidated net revenues in the United States, and the reporting
currency for our consolidated financial statements is the U.S. dollar. As our net revenues and certain expenses
generated outside of the United States increase, our results of operations could be adversely impacted by changes
in foreign currency exchange rates. For example, as we recognize foreign revenues in local foreign currencies
and if the U.S. dollar strengthens, it could have a negative impact on our foreign revenues upon translation of
those results into the U.S. dollar upon consolidation of our financial statements. In addition, we are exposed to
gains and losses resulting from fluctuations in foreign currency exchange rates on transactions generated by our
foreign subsidiaries in currencies other than their local currencies. These gains and losses are primarily driven by
intercompany transactions. These exposures are included in other expense, net on the consolidated statements of
income.
From time to time, we may elect to use foreign currency forward contracts to reduce the risk from exchange
rate fluctuations primarily on intercompany transactions and projected inventory purchases for our international
subsidiaries. We do not enter into derivative financial instruments for speculative or trading purposes.
As of December 31, 2013, the aggregate notional value of our outstanding foreign currency forward
contracts was $20.6 million, which was comprised of Canadian Dollar/U.S. Dollar, Euro/U.S. Dollar, and Pound
Sterling/Euro currency pairs with contract maturities of 1 month. The foreign currency forward contracts
outstanding as of December 31, 2013 have weighted average contractual forward foreign currency exchange rates
of 1.07 CAD per $1.00, €0.73 per $1.00, and £0.83 per €1.00. The foreign currency forward contracts are not
designated as cash flow hedges, and accordingly, changes in their fair value are recorded in earnings. The fair
values of the Company’s foreign currency forward contracts were assets of $12.1 thousand and $4.8 thousand as
of December 31, 2013 and 2012, respectively, and were included in prepaid expenses and other current assets on
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