Note G - Derivative Instruments

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

NOTE G—DERIVATIVE INSTRUMENTS

The Company accounts for derivative instruments in accordance with FASB. ASC

No.

815

"Derivatives and Hedging" ("ASC 

815"

). Due to the Company’s global operations, it is exposed to foreign currency exchange rate fluctuations in the normal course of its business. The Company’s treasury policy allows it to offset the risks associated with the effects of certain foreign currency exposures through the purchase of foreign exchange forward contracts and put options (collectively, "hedging contracts"). The policy, however, prohibits the Company from speculating on hedging contracts for profit.

To protect against the increase in value of forecasted foreign currency cash flows resulting from salary and lease payments of its Israeli facilities denominated in the Israeli currency, the New Israeli Shekels ("NIS"), during the year, the Company instituted a foreign currency cash flow hedging program. The Company hedges portions of the anticipated payroll and lease payments denominated in NIS for a period of

one

to

twelve

months with hedging contracts. Accordingly, when the dollar strengthens against the foreign currencies, the decline in present value of future foreign currency expenses is offset by losses in the fair value of the hedging contracts. Conversely, when the dollar weakens, the increase in the present value of future foreign currency cash flows is offset by gains in the fair value of the hedging contracts. These hedging contracts are designated as cash flow hedges, as defined by ASC 

815

and are all effective hedges of these expenses.

In accordance with ASC 

815,

for derivative instruments that are designated and qualify as a cash flow hedge (i.e. hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Any gain or loss on a derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item is recognized in current earnings during the period of change. As of

June 30, 2018,

the Company had

no

outstanding option contracts and foreign exchange forward contracts in the amount of

$2,500.

These hedging contracts do

not

contain any credit-risk-related contingency features. See Note K for information on the fair value of hedging contracts.

The fair value of derivative assets and derivative liabilities were

$0

and

$20,

respectively, at

June 30, 2018.

The Company recorded a net amount of

$20

in other accounts payable in the condensed consolidated balance sheet at

June 30, 2018.

The amount recorded as an income in research and development expenses, sales and marketing expenses and general and administrative expenses in the condensed consolidated statements of income for the

six

months ended

June 30, 2018

that resulted from the above referenced hedging transactions was

$7,

$1

and

$1,

respectively.

The fair value of the outstanding derivative instruments at

June 30, 2018

and

December 

31,

2017

 is summarized below (unaudited):

		Fair value of derivative instruments
Derivative Assets (Liabilities)	Balance Sheet Location	June 30, 201 8		December 31, 201 7
		Unaudited		Audited
Foreign exchange forward and option contracts	Other accounts payable	$	20	$	-

The effect of derivative instruments in cash flow hedging transactions on income and other comprehensive income (“OCI”) for the

three

and

six

months ended

June 30, 2018

and

2017

is summarized below (unaudited):

	Gains (losses) on Derivatives Recognized in OCI
	for the three months ended June 30,					for the six months ended June 30,
				Unaudited
	2018			2017		2018			2017
Foreign exchange forward and option contracts	$	(29	)	$	49	$	(29	)	$	192

	Gains (Losses) Reclassified from OCI into income
		for the three months ended June 30					for the six months ended June 30,
					Unaudited
	Location	2018			2017		2018			2017
Foreign exchange forward and option contracts	Operating expenses	$	(9	)	$	78	$	(9	)	$	153