DERIVATIVE INSTRUMENTS

12 Months Ended

Dec. 31, 2016

DERIVATIVE INSTRUMENTS

4. DERIVATIVE INSTRUMENTS

The Company uses forward contracts to hedge its exposure to fluctuations in foreign currency exchange rates associated with its foreign currency denominated cash, accounts receivable, and intercompany receivables and payables held by its U.S. parent company and U.K. subsidiary.

The Company is primarily exposed to foreign currency exchange rate fluctuations in the U.S. dollar, the Euro, and the Australian dollar relative to the British pound and the Euro relative to the U.S. dollar. At the end of June 2016, the U.K. held a referendum in which U.K. voters approved an exit from the European Union, commonly referred to as “Brexit”. The announcement of Brexit resulted in a sharp decline in the value of the British pound, as compared to the U.S. dollar and other currencies. This decline primarily resulted in foreign currency transaction gains from the remeasurement of foreign currency denominated cash and accounts receivable held by the Company’s U.K. subsidiary with corresponding losses on the Company’s forward contracts included in other expense, net.

The forward contracts are not designated as hedging instruments. As a result, the Company records the fair value of these contracts at the end of each reporting period in the accompanying consolidated balance sheets 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 the accompanying consolidated statements of operations. The cash flows related to these forward contracts are classified as operating activities in the accompanying consolidated statements of cash flows. The Company does not enter into any forward contracts for trading or speculative purposes.

As of December 31, 2016 and 2015, the total notional amount of the Company’s outstanding forward contracts was $128.4 million and $32.3 million, respectively. The Company did not have any forward contracts outstanding as of December 31, 2014.

The fair value of the Company’s outstanding forward contracts was as follows:

(in thousands)	December 31, 2016				December 31, 2015
	Recorded In:		Fair Value		Recorded In:		Fair Value
Asset Derivatives
Foreign currency forward contracts		Other current assets	$	628		Other current assets	$	48
Liability Derivatives
Foreign currency forward contracts		Accrued expenses	$	883		Accrued expenses	$	1,052

The Company had forward contracts outstanding with total notional values as follows:

	As of December 31,
Currency (in thousands)	2016		2015
Euro	€	29,820	€	14,900
British pound	£	6,440	£	—
Australian dollar	A$	22,010	A$	9,100
United States dollar	$	73,125	$	9,400

	Change in Fair Value in USD
	Year Ended December 31,
(in thousands)	2016			2015			2014
Loss from the change in the fair value of forward contracts included in other expense, net	$	(5,643	)	$	(1,047	)	$	(532	)
Foreign currency transaction gains (losses) from the remeasurement of foreign currency assets and liabilities		2,247			(4,168	)		(3,769	)