Derivative Financial Instruments and Risk Management

3 Months Ended

Jul. 31, 2015

Derivative Financial Instruments and Risk Management [Text Block]

Note 4	Derivative Financial Instruments and Risk Management
	In the normal course of business, the Company is exposed to fluctuations in the exchange rates associated with foreign currencies. The Company’s primary objective for holding derivative financial instruments is to manage foreign currency exchange rate risk.
	Foreign Currency Exchange Rate Risk
	A majority of the Company’s revenue activities are transacted in U.S. dollars. However, the Company is exposed to foreign currency exchange rate risk inherent in conducting business globally in numerous currencies, of which the most significant to the Company’s operations for the three months ended July 31, 2015 is the Canadian dollar as a majority of the Company’s expenses are in Canadian dollars. The Company’s foreign currency risk management program includes foreign currency derivatives with cash flow hedge accounting designation that utilizes foreign currency forward contracts to hedge exposures to the variability in the U.S. dollar equivalent of anticipated non-U.S. dollar-denominated cash flows. During the three months ended July 31, 2015 and 2014, the Company did not enter into any cash flow hedges.
	The Company also routinely enters into foreign currency forward contracts, not designated as hedging instruments, to protect it from fluctuations in exchange rates. During the three months ended July 31, 2015, the Company entered into a $1,000,000 notional value foreign currency forward contract that matures on August 20, 2015. During the three months ended July 31, 2014, the Company had not entered into any foreign currency forward contracts. The fair value marked to market loss of the forward contract as at July 31, 2015 was $39,615.

Fair Value Measurement

When available, the Company uses quoted market prices to determine fair value, and classifies such measurements within Level 1. In some cases where market prices are not available, the Company makes use of observable market–based inputs to calculate fair value, in which case the measurements are classified within Level 2. If quoted or observable market prices are not available, fair value is based upon internally developed models that use, where possible, current market–based parameters such as interest rates, yield curves and currency rates. These measurements are classified within Level 3.

Fair value measurements are classified according to the lowest level input or value–driver that is significant to the valuation. A measurement may therefore be classified within Level 3 even though there may be significant inputs that are readily observable.

Fair value measurement includes the consideration of non–performance risk. Non–performance risk refers to the risk that an obligation (either by a counterparty or the Company) will not be fulfilled. For financial assets traded in an active market (Level 1), the non–performance risk is included in the market price. For certain other financial assets and liabilities (Level 2 and 3), the Company’s fair value calculations have been adjusted accordingly.

The fair value of the derivative instrument is primarily based on the standard industry accepted Binomial Method (Note 5). The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis as of July 31, 2015 and April 30, 2015.

		Carrying					Fair Value
As at July 31, 2015		Amount			Fair Value		Levels	Reference
Cash and cash equivalents	$	2,214,621		$	2,214,621		1	N/A
Accounts receivable	$	3,068,218		$	3,068,218		2	N/A
Forward contracts	$	(39,615	)	$	(39,615	)	2	N/A

		Carrying			Fair Value
As at April 30, 2015		Amount		Fair Value	Levels	Reference
Cash and cash equivalents	$	2,852,422	$	2,852,422	1	N/A
Accounts receivable	$	3,305,466	$	3,305,466	2	N/A

Forward contracts		July 31,			April 30,
		2015			2015
Opening balance at the beginning of the period/year	$	-		$	-
Fair value of forward contract, at issuance		-			-
Change in fair value of forward contracts since issuance		(39,615	)		-
Fair value of forward contracts settled during the period/year		-			-
Fair value of forward contracts at end of period/year	$	(39,615	)	$	-