Note G - Derivative Instruments

9 Months Ended

Sep. 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

September 30, 2018,

the Company had

no

outstanding option or foreign exchange forward contracts.

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

nine

months ended

September 30, 2018

that resulted from the above referenced hedging transactions was

$5,

$1

and

$1,

respectively.

The company had

no

outstanding derivative instruments at

September 30, 2018.

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

three

and

nine

months ended

September 30, 2018

and

2017

is summarized below (unaudited):

	Gains (L osses) on Derivatives Recognized in OCI
	for the three months ended September  30,					for the nine months ended September 30,
	Unaudited
	2018		2017			2018			2017
Foreign exchange forward and option contracts	$	13	$	(29	)	$	(16	)	$	163

	Gains (Losses) Reclassified from OCI into Income
		for the three months ended September 30					for the nine months ended September 30,
		Unaudited
		2018			2017		2018			2017
Foreign exchange forward and option contracts	Operating expenses	$	(7	)	$	19	$	(16	)	$	172