DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

3 Months Ended

Sep. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Foreign Currency Forward Contracts

We are engaged in hedging programs with various banks to limit the potential foreign exchange fluctuations incurred on future cash flows relating to a portion of our Canadian dollar payroll expenses. We operate internationally and are therefore exposed to foreign currency exchange rate fluctuations in the normal course of our business, in particular to changes in the Canadian dollar on account of large costs that are incurred from our centralized Canadian operations, which are denominated in Canadian dollars. As part of our risk management strategy, we use foreign currency forward contracts to hedge portions of our payroll exposure with typical maturities of between one and twelve months. We do not use foreign currency forward contracts for speculative purposes.

We have designated these transactions as cash flow hedges of forecasted transactions under ASC Topic 815 “Derivatives and Hedging” (Topic 815). As the critical terms of the hedging instrument and of the entire hedged forecasted transaction are the same, in accordance with Topic 815, we have been able to conclude that changes in fair value or cash flows attributable to the risk being hedged are expected to completely offset at inception and on an ongoing basis. Accordingly, quarterly unrealized gains or losses on the effective portion of these forward contracts have been included within other comprehensive income. The fair value of the contracts, as of September 30, 2020, is recorded within "Prepaid expenses and other current assets" and represents the net gain before tax effect that is expected to be reclassified from accumulated other comprehensive income into earnings with the next twelve months.

As of September 30, 2020, the notional amount of forward contracts we held to sell U.S. dollars in exchange for Canadian dollars was $62.6 million (June 30, 2020—$62.3 million).

Fair Value of Derivative Instruments and Effect of Derivative Instruments on Financial Performance

The effect of these derivative instruments on our Condensed Consolidated Financial Statements for the periods indicated below were as follows (amounts presented do not include any income tax effects).

Fair Value of Derivative Instruments in the Condensed Consolidated Balance Sheets (see note 16 "Fair Value Measurement")

As of September 30, 2020

As of June 30, 2020

Derivatives

Balance Sheet Location

Fair Value
Asset (Liability)

Foreign currency forward contracts designated as cash flow hedges

Prepaid expenses and other current assets (Accounts payable and accrued liabilities)

753

(185)

Effects of Derivative Instruments on Income and Other Comprehensive Income (OCI)

Three Months Ended September 30, 2020

Derivatives in Cash Flow Hedging Relationship

Amount of Gain or (Loss) Recognized in OCI on Derivatives (Effective Portion)

Location of Gain or (Loss)
Reclassified from Accumulated OCI into Income
(Effective Portion)

Amount of Gain or (Loss)
Reclassified from Accumulated OCI into Income
(Effective Portion)

Foreign currency forward contracts

1,150

Operating expenses

212

Three Months Ended September 30, 2019