DERIVATIVE FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

The Company conducts a large portion of its operations in international markets that subject it to foreign currency fluctuations. To manage the risk of fluctuations in foreign currency exchange rates, during the year ended December 31, 2018, the Company implemented a hedging program whereby it enters into a series of foreign exchange forward contracts with durations of twelve months or less that are designated as cash flow hedges of forecasted Russian ruble, Polish zloty and Indian rupee transactions.

The Company measures derivative instruments and hedging activities at fair value and recognizes them as either assets or liabilities in its consolidated balance sheets. Accounting for the gains and losses resulting from changes in fair value depends on the use of the derivative and whether it is designated and qualifies for hedge accounting. To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge, and the hedges must be highly effective in offsetting changes to future cash flows on hedged transactions. As of December 31, 2019, all of the Company’s foreign exchange forward contracts were designated as hedges.

Derivatives may give rise to credit risks from the possible non-performance by counterparties. The Company has limited its credit risk by entering into derivative transactions only with highly-rated financial institutions and by conducting an ongoing evaluation of the creditworthiness of the financial institutions with which the Company does business. There is no financial collateral (including cash collateral) required to be posted by the Company related to the foreign exchange forward contracts.

The fair value of derivative instruments on the Company’s consolidated balance sheets as of December 31, 2019 and December 31, 2018 were as follows:



		As of December 31, 2019				As of December 31, 2018
	Balance Sheet Classification	Asset Derivatives		Liability Derivatives		Asset Derivatives		Liability Derivatives
Foreign exchange forward contracts - Designated as hedging instruments	Prepaid and other current assets	$	1,910			$	181
	Accrued expenses and other current liabilities			$	243			$	3,475

The changes in the fair value of foreign currency derivative instruments in the Company’s consolidated statements of income and comprehensive income for the years ended December 31, 2019, 2018 and 2017 were as follows:



	Year Ended December 31,
	2019		2018			2017
Foreign exchange forward contracts - Designated as hedging instruments:
Net gain/(loss) in fair value recognized in Accumulated other comprehensive loss	$	4,961	$	(3,294	)	$	—
Net gain/(loss) reclassified from Accumulated other comprehensive loss into Cost of revenues (exclusive of depreciation and amortization)	$	2,028	$	(4,161	)	$	—
Foreign exchange forward contracts - Not designated as hedging instruments:
Net gain recognized in Foreign exchange (loss)/gain	$	—	$	44		$	425