11. DERIVATIVE FINANCIAL INSTRUMENTS

We are exposed to various market risks, including risks associated with interest rates and foreign currency exchange rates. We enter into certain derivative transactions to mitigate the volatility associated with these exposures. We have policies in place that define acceptable instrument types we may enter into and we have established controls to limit our market risk exposure. We do not use derivative financial instruments for trading or speculative purposes. In addition, all derivatives, whether designated in hedging relationships or not, are required to be recorded on the Consolidated Balance Sheets at fair value on a gross basis.

Foreign Currency Contracts Not Designated as Hedges

On a regular basis, we enter into forward foreign exchange contracts in an effort to mitigate the risks associated with currency fluctuations on certain foreign currency balance sheet exposures. These foreign exchange contracts do not qualify for hedge accounting; therefore, the gains and losses resulting from the impact of currency exchange rate movements on our forward foreign exchange contracts are recognized as other income or expense in the accompanying consolidated income statements in the period in which the exchange rates change. As of December 31, 2018 and September 30, 2018, the notional amounts of the forward contracts we held to purchase U.S. dollars in exchange for foreign currencies were $2,981 and $7,652, respectively, and the notional amounts of forward contracts we held to sell U.S. dollars in exchange for foreign currencies were $30,235 and $24,860, respectively.

Net Investment Hedge - Foreign Exchange Contracts

In September 2017, we entered into forward contracts to sell 100 billion Korean won and buy U.S. dollars, which we subsequently terminated in the third quarter of fiscal 2018. We had designated these forward contracts as an effective net investment hedge. During the first quarter of fiscal 2018, the change in the fair value of these forward contracts in the net investment hedge relationship was $3,241, which was recorded in foreign currency translation adjustments within other comprehensive income.

The fair value of our derivative instruments included in the Consolidated Balance Sheets, which was determined using Level 2 inputs, was as follows:

		Asset Derivatives						Liability Derivatives
	Consolidated Balance Sheet Location	December 31, 2018			September 30, 2018			December 31, 2018			September 30, 2018
Derivatives not designated as hedging instruments
Foreign exchange contracts	Prepaid expenses and other current assets		$	643		$	-		$	-		$	-
	Accrued expenses, income taxes payable and other current liabilities		$	-		$	-		$	50		$	339

The following table summarizes the effect of our derivative instruments on our Consolidated Statements of Income (Loss) for the three months ended December 31, 2018 and 2017:

		Loss Recognized in Statements of Income (Loss)
		Three Months Ended
	Statements of Income (Loss) Location	December 31, 2018			December 31, 2017
Derivatives not designated as hedging instruments
Foreign exchange contracts	Other income (expense), net		$	311		$	(809	)