Derivative Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2011

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

6. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company enters into foreign exchange forward contracts & currency option contracts where the counter party is a bank. The Company purchases foreign exchange forward contracts & currency option contracts to mitigate the risk of changes in foreign exchange rates on cash flows denominated in certain foreign currencies. These contracts are carried at fair value with resulting gains or losses included in the consolidated statements of income in other income.

During the quarter ended June 30, 2011, the Company did not enter into new foreign exchange forward contracts. During the quarter ended June 30, 2011, contracts amounting to $40.0 million expired resulting in a gain of $0.66 million. At June 30, 2011, foreign exchange forward contracts amounting to $30.0 million were outstanding. The fair value of the foreign exchange forward contracts of $0.63 million is reflected in other current assets in the balance sheet of the Company as at June 30, 2011. During the quarter ended June 30, 2011 forward contract gain of $0.39 million, pertaining to direct client related contracts is recorded as other income and forward contract gain of $0.27 million, pertaining to intercompany related contracts is recorded as other comprehensive gain.