Derivative Instruments And Hedging Activities

6 Months Ended

Sep. 30, 2011

Derivative Instruments And Hedging Activities [Abstract]

Derivative Instruments And Hedging Activities

10. Derivative Instruments and Hedging Activities

NetScout operates internationally and, in the normal course of business, is exposed to fluctuations in foreign currency exchange rates. The exposures result from costs that are denominated in currencies other than the U.S. dollar, primarily the Euro, British Pound, Canadian Dollar, and Indian Rupee. The Company manages its foreign cash flow risk by hedging forecasted cash flows for operating expenses denominated in foreign currencies for up to twelve months, within specified guidelines through the use of forward contracts. The Company enters into foreign currency exchange contracts to hedge cash flow exposures from costs that are denominated in currencies other than the U.S. dollar. These hedges are designated as cash flow hedges at inception.

All of the Company's derivative instruments are utilized for risk management purposes, and the Company does not use derivatives for speculative trading purposes. These contracts will mature over the next twelve months and are expected to impact earnings on or before maturity.

The notional amounts and fair values of derivative instruments in the condensed consolidated balance sheets as of September 30, 2011 and March 31, 2011 were as follows (in thousands):

	Notional Amounts (a)				Other Current Assets				Accrued Other Liabilities
	September 30, 2011		March 31, 2011		September 30, 2011		March 31, 2011		September 30, 2011		March 31, 2011
Derivatives Designated as Hedging Instruments:
Forward contracts	$	13,220	$	10,943	$	18	$	158	$	412	$	92

(a) Notional amounts represent the gross contract/notional amount of the derivatives outstanding.

The following table provides the effect foreign exchange forward contracts had on other comprehensive income (loss) (OCI) and results of operations for the three months ended September 30, 2011 and 2010 (in thousands):

	Effective Portion												Ineffective Portion
Derivatives in Cash Flow Hedging Relationships	Gain (Loss) Recognized in OCI on Derivative (a)					Gain (Loss) Reclassified from Accumulated OCI into Income (b)							Gain (Loss) Recognized in Income (Amount Excluded from Effectiveness Testing) (c)
	September 30, 2011			September 30, 2010		Location	September 30, 2011			September 30, 2010			Location	September 30, 2011		September 30, 2010
Forward contracts	$	(480	)	$	433	Research and development	$	(17	)	$	(14	)	Research and development	$	21	$	24
						Sales and marketing		73			(157	)	Sales and marketing		31		(6	)
	$	(480	)	$	433		$	56		$	(171	)		$	52	$	18

(a) The amount represents the change in fair value of derivative contracts due to changes in spot rates.

(b) The amount represents reclassification from other comprehensive income to earnings that occurs when the hedged item affects earnings.

(c) The amount represents the change in fair value of derivative contracts due to changes in the difference between the spot price and forward price that is excluded from the assessment of hedge effectiveness and therefore recognized in earnings. No gains or losses were reclassified as a result of discontinuance of cash flow hedges.

The following table provides the effect foreign exchange forward contracts had on OCI and results of operations for the six months ended September 30, 2011 and 2010 (in thousands):

	Effective Portion													Ineffective Portion
Derivatives in Cash Flow Hedging Relationships	Gain (Loss) Recognized in OCI on Derivative (a)						Gain (Loss) Reclassified from Accumulated OCI into Income (b)							Gain (Loss) Recognized in Income (Amount Excluded from Effectiveness Testing) (c)
	September 30, 2011			September 30, 2010			Location	September 30, 2011			September 30, 2010			Location	September 30, 2011		September 30, 2010
Forward contracts	$	(296	)	$	(129	)	Research and development	$	(3	)	$	(7	)	Research and development	$	77	$	8
							Sales and marketing		234			(426	)	Sales and marketing		35		1
	$	(296	)	$	(129	)		$	231		$	(433	)		$	112	$	9

(a) The amount represents the change in fair value of derivative contracts due to changes in spot rates.

(b) The amount represents reclassification from other comprehensive income to earnings that occurs when the hedged item affects earnings.

(c) The amount represents the change in fair value of derivative contracts due to changes in the difference between the spot price and forward price that is excluded from the assessment of hedge effectiveness and therefore recognized in earnings. No gains or losses were reclassified as a result of discontinuance of cash flow hedges.