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Derivatives and Hedge Accounting
 6 Months Ended
Jun. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedge Accounting Derivatives and Hedge Accounting
The Company uses derivative instruments and hedging transactions to mitigate exposure to foreign currency fluctuation risks associated with forecasted transactions denominated in certain foreign currencies so as to minimize earnings and cash flow volatility associated with changes in foreign currency exchange rates. The Company’s derivative financial instruments are largely forward foreign exchange contracts that are designated as effective hedges and that qualify as cash flow hedges under ASC 815. The Company had outstanding cash flow hedges totaling $421,630 (including $750 of range forward contracts) as of June 30, 2020 and $410,390 (including $4,300 of range forward contracts) as of December 31, 2019.

Changes in the fair value of these cash flow hedges are recorded as a component of accumulated other comprehensive income/(loss), net of tax, until the hedged transactions occurs. The resultant foreign exchange gain/(loss) upon settlement of these cash flow hedges is recorded along with the underlying hedged item in the same line of unaudited consolidated statements of income as either a part of “Cost of revenues”, “General and administrative expenses”, “Selling and marketing expenses”, “Depreciation and amortization expense”, as applicable. The impact of COVID-19 on the economic environment is uncertain and may cause variability in determination of fair value of these cash flow hedges, which could impact the effects of change in fair value that get recorded as a component of accumulated other comprehensive income/(loss) and also resultant exchange gain/(loss) upon settlement of derivative financial instruments.

The Company evaluates hedge effectiveness at the time a contract is entered into as well as on an ongoing basis. For hedging positions that are discontinued because the forecasted transaction is not expected to occur by the end of the originally specified period, any related amounts recorded in equity are reclassified to earnings.

The Company estimates that approximately $561 of net derivative losses, excluding tax effects, included in AOCI, representing changes in the fair value of cash flow hedges, could be reclassified into earnings within the next twelve months based on exchange rates prevailing as of June 30, 2020. At June 30, 2020, the maximum outstanding term of the cash flow hedges was 45 months.

The Company also enters into foreign currency forward contracts to economically hedge its intercompany balances and other monetary assets and liabilities denominated in currencies other than functional currencies, against the risk of foreign currency fluctuations associated with remeasurement of such assets and liabilities to functional currency. These derivatives do not qualify as fair value hedges under ASC 815. Changes in the fair value of these derivatives are recognized in the unaudited
consolidated statements of income and are included in the foreign exchange gain/(loss) line item. The impact of COVID-19 on the economic environment is uncertain and may cause variability in determination of fair value of these derivatives, which could impact the effects of change in fair value that get recorded in the foreign exchange gain/(loss) line item. The Company’s primary exchange rate exposure is with the Indian Rupee, the U.K. pound sterling and the Philippine peso. The Company also has exposure to Colombian pesos, Czech Koruna, the Euro, South African ZAR and other local currencies in which it operates. Outstanding foreign currency forward contracts amounted to $106,988, GBP 9,487 and EUR 1,453 as of June 30, 2020 and $124,045, GBP 10,843 and EUR 1,289 as of December 31, 2019.

The following tables set forth the fair value of the foreign currency exchange contracts and their location on the unaudited consolidated financial statements:
Derivatives designated as hedging instruments:As of
Foreign currency exchange contractsJune 30, 2020December 31, 2019
Other current assets$4,070  $3,945  
Other assets$1,734  $3,433  
Accrued expenses and other current liabilities$4,631  $1,524  
Other non-current liabilities$3,496  $1,250  
Derivatives not designated as hedging instruments:As of
Foreign currency exchange contractsJune 30, 2020December 31, 2019
Other current assets$58  $131  
Accrued expenses and other current liabilities$118  $259  

The following tables set forth the effect of foreign currency exchange contracts on the unaudited consolidated statements of income and accumulated other comprehensive loss for the three and six months ended June 30, 2020 and 2019:
Three months ended June 30,Six months ended June 30,
Forward Exchange Contracts:2020201920202019
Unrealized gain/(loss) recognized in AOCI
Derivatives in cash flow hedging relationships$7,721  $3,268  $(7,125) $9,205  
Gain/(loss) recognized in consolidated statements of income
Derivatives not designated as hedging instruments$3,204  $2,923  $(1,011) $4,319  
Location and amount of gain/(loss) recognized in unaudited consolidated statements of income for cash flow hedging relationships and derivatives not designated as hedging instruments
Three months ended June 30,
20202019
As per unaudited consolidated statements of income(Loss)/Gain on foreign currency exchange contractsAs per unaudited consolidated statements of incomeGain on foreign currency exchange contracts
Cash flow hedging relationships
Location in unaudited consolidated statements of income where gain/(loss) was reclassed from AOCI
Cost of revenues$158,401  $(851) $162,446  $719  
General and administrative expenses$28,750  (187) $31,228  106  
Selling & marketing expenses$13,051  (9) $17,647  12  
Depreciation & amortization expense$12,405  (80) $12,752  47  
$(1,127) $884  
Derivatives not designated as hedging instruments
Location in unaudited consolidated statements of income where gain/(loss) was recognized
Foreign exchange gain, net$1,359  $3,204  $1,202  $2,923  
$1,359  $3,204  $1,202  $2,923  
Location and amount of gain/(loss) recognized in unaudited consolidated statements of income for cash flow hedging relationships and derivatives not designated as hedging instruments
Six months ended June 30,
20202019
As per unaudited consolidated statements of incomeLoss on foreign currency exchange contractsAs per unaudited consolidated statements of incomeGain on foreign currency exchange contracts
Cash flow hedging relationships
Location in unaudited consolidated statements of income where gain/(loss) was reclassed from AOCI
Cost of revenues$321,057  $(39) $319,686  $1,250  
General and administrative expenses$57,691  (114) $63,759  186  
Selling & marketing expenses$27,507  (5) $35,694  19  
Depreciation & amortization expense$24,855  (40) $26,419  100  
$(198) $1,555  
Derivatives not designated as hedging instruments
Location in unaudited consolidated statements of income where gain/(loss) was recognized
Foreign exchange gain/(loss), net$2,736  $(1,011) $2,462  $4,319  
$2,736  $(1,011) $2,462  $4,319