FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2013

NOTE 7:- FAIR VALUE MEASUREMENTS

In accordance with ASC No. 820, the Group measures its foreign currency derivative instruments, its contingent consideration to NSC's former shareholders and its contingent consideration to Mailvision, at fair value. Investments in foreign currency derivative instruments are classified within Level 2 value hierarchy. This is because these assets are valued using alternative pricing sources and models utilizing market observable inputs. The contingent consideration to NSC's former shareholders and the Earn Out and the Sale Option provided to Mailvision are classified within Level 3 value hierarchy because these liabilities are based on present value calculations and an external valuation models whose inputs include market interest rates, estimated operational capitalization rates and volatilities. Unobservable inputs used in these models are significant.

The Group's financial assets and liabilities measured at fair value on a recurring basis, consisted of the following types of instruments as of the following dates:

	December 31, 2012 (Audited)
	Fair value measurements using input type
	Level 2		Level 3		Total

Financial assets related to foreign currency derivative hedging contracts	$	1,303	$	-	$	1,303

Financial Liabilities:
Foreign currency derivative contracts	$	(362)	$	-	$	(362)
Contingent consideration related to NSC's former shareholders		-		(115)		(115)

Total Financial liability	$	(362)	$	(115)	$	(477)

	September 30, 2013 (unaudited)
	Fair value measurements using input type
	Level 2		Level 3		Total

Financial assets related to foreign currency derivative hedging contracts	$	855	$	-	$	855

Financial Liabilities:
Foreign currency derivative contracts	$	(386)	$	-	$	(386)
Contingent consideration related to Mailvision		-		(662)		(662)

Total Financial liability	$	(386)	$	(662)	$	(1,048)

Fair value measurements using significant unobservable inputs (Level 3):

Balance at January 1, 2013	$	(115)
Liabilities incurred in relation to the APA with Mailvision		(808)
Repayment of NSC's contingent consideration		120
Adjustment due to time change value		141

Balance at September 30, 2013	$	(662)

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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