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Derivatives and Hedge Accounting
 12 Months Ended
Dec. 31, 2021
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 $514,580 as of December 31, 2021 and $451,935 as of December 31, 2020.
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 consolidated statements of income as a part of “Cost of revenues,” “General and administrative expenses,” “Selling and marketing expenses,” and “Depreciation and amortization expense,” as applicable.
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 $7,345 of derivative gains, net, excluding tax effects, included in AOCI, representing changes in the value of cash flow hedges, could be reclassified into earnings within the next twelve months based
on exchange rates prevailing as of December 31, 2021. At December 31, 2021, the maximum outstanding term of the cash flow hedges was 42 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 consolidated statements of income and are included 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 (GBP) and the Philippine peso. The Company also has exposure to Colombian pesos (COP), Czech koruna, the Euro (EUR), South African ZAR, the Australian dollar (AUD) and other local currencies in which it operates. Outstanding foreign currency forward contracts amounted to USD 134,612, GBP 6,763, EUR 1,343 and COP 2,541,902 as of December 31, 2021 and USD 143,394, GBP 6,753, EUR 2,447 and COP 8,287,950 as of December 31, 2020.
The Company uses forward contracts designated as net investment hedges to hedge the foreign currency risks related to our investments in foreign subsidiaries. Gains and losses on these net investment hedges are recognized in AOCI as part of foreign currency translation adjustments.
All of the assets and liabilities related to our foreign exchange forward contracts are subject to master netting arrangements with each individual counterparty. These master netting arrangements generally provide for net settlement of all outstanding contracts with the counterparty in the case of an event of default or a termination event. We have presented all of the assets and liabilities related to our foreign exchange forward contracts on a gross basis, with no offsets, in our consolidated statements of financial position. There is no financial collateral (including cash collateral) provided or received by us related to our foreign exchange forward contracts.
The following tables set forth the fair value of the foreign currency exchange contracts and their location on the consolidated financial statements:
Derivatives designated as hedging instruments:As of
Foreign currency exchange contractsDecember 31, 2021December 31, 2020
Other current assets$8,669 $9,740 
Other assets$6,307 $6,933 
Accrued expenses and other current liabilities$1,324 $176 
Other non-current liabilities$1,785 $29 
Derivatives not designated as hedging instruments:
As of
Foreign currency exchange contractsDecember 31, 2021December 31, 2020
Other current assets$13 $15 
Accrued expenses and other current liabilities$528 $259 

The following tables set forth the effect of foreign currency exchange contracts on the consolidated statements of income and accumulated other comprehensive income/(loss) for the years ended December 31, 2021, 2020 and 2019.
Year ended December 31,
Forward Exchange Contracts:202120202019
Unrealized gain recognized in AOCI
Derivatives in cash flow hedging relationships$4,663 $12,665 $8,773 
Gain recognized in consolidated statements of income
Derivatives not designated as hedging instruments$196 $3,686 $3,208 
Location and amount of gain/(loss) recognized in consolidated statements of income for cash flow hedging relationships and derivatives not designated as hedging instruments:
Year ended December 31,
202120202019
As per consolidated statements of incomeGain on foreign currency exchange contractsAs per consolidated statements of incomeGain/(loss) on foreign currency exchange contractsAs per consolidated statements of incomeGain on foreign currency exchange contracts
Cash flow hedging relationships
Location in consolidated statements of income where gain/(loss) was reclassed from AOCI
Cost of revenues$690,934 $7,785 $623,936 $1,008 $655,490 $3,269 
General and administrative expenses$142,040 $948 $113,891 $(161)$126,909 $424 
Selling and marketing expenses$84,306 $53 $60,123 $(5)$71,842 $46 
Depreciation and amortization expense$49,132 $478 $50,462 $(41)$51,981 $212 
Total before tax$9,264 $801 $3,951 
Income tax benefit/(expense) relating to above$(1,530)$500 $(1,173)
Net of tax$7,734 $1,301 $2,778 
Derivatives not designated as hedging instruments
Location in consolidated statements of income where gain was recognized
Foreign exchange gain, net$4,313 $196 $4,432 $3,686 $3,752 $3,208 
$4,313 $196 $4,432 $3,686 $3,752 $3,208 
Effect of net investment hedges on accumulated other comprehensive income/(loss):
Year ended December 31,
Amount of loss recognized in AOCI
Net investment hedging relationships
202120202019
Foreign exchange contracts
$1,134 $— $—