DERIVATIVE INSTRUMENTS

12 Months Ended

Dec. 31, 2014

DERIVATIVE INSTRUMENTS

4. DERIVATIVE INSTRUMENTS

The Company has historically used foreign currency forward contracts (“forward contracts”) to manage its exposure to changes in foreign currency exchange rates associated with its foreign currency denominated accounts receivable, cash and intercompany payables. The U.S. operating company invoices most of its foreign clients in foreign currencies, which results in cash and receivables held at the end of the reporting period denominated in these foreign currencies. Since the U.S. operating company’s functional currency is the U.S. dollar, the Company recognizes a foreign currency transaction gain or (loss) on the foreign currency denominated cash, intercompany payables and accounts receivable held by the U.S. operating company in its consolidated statements of operations when there are changes in the foreign currency exchange rates versus the U.S. dollar. The Company has been primarily exposed to the fluctuation in the British pound, Euro, Australian dollar, and Indian rupee relative to the U.S. dollar. The Company began to use forward contracts to mitigate its British pound and Euro exposures in the second quarter of 2011 and for its Australian dollar and Indian rupee exposures in the third quarter of 2013.

The forward contracts utilized by the Company are not designated as hedging instruments and as a result, the Company records the fair value of these contracts at the end of each reporting period in its consolidated balance sheet as other current assets for unrealized gains and accrued expenses for unrealized losses, with any fluctuations in the value of these contracts recognized in other expense, net, in its consolidated statement of operations. However, the fluctuations in the value of these foreign currency forward contracts partially offset the gains and losses from the remeasurement or settlement of the foreign currency denominated accounts receivable, intercompany payables, and cash held by the U.S. operating company, thus partly mitigating the volatility. Generally, the Company enters into foreign currency forward contracts with terms not greater than 90 days.

The Company is in the process of reassessing its hedging strategy and has not entered into any forward contracts since February 2014. As of December 31, 2014 and 2013, the Company did not have any forward contracts outstanding.

The Company entered into forward contracts with notional values as follows:

	Year Ended December 31,
Foreign currency (in thousands)	2014		2013		2012
Euro	€	21,900	€	102,300	€	49,700
British pound	£	26,500	£	85,400	£	52,000
Australian dollar	A$	12,900	A$	26,300	A$	—
Indian rupee	Rs	204,000	Rs	690,000	Rs	—

The total change in the fair value of the Company’s forward contracts recorded in other expense, net, was as follows:

	Change in Fair Value in USD
	Year Ended December 31,
(in thousands)	2014			2013			2012
Loss included in other expense, net	$	(532	)	$	(747	)	$	(1,738	)