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Derivative financial instruments (Tables)
 12 Months Ended
Dec. 31, 2016
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
Aggregate Notional Principal Amounts of Outstanding Derivative Financial Instruments with Related Balance Sheet Exposure

The following table presents the aggregate notional principal amounts of outstanding derivative financial instruments together with the related balance sheet exposure:

 

 

 

Notional principal amounts

(note a)

 

 

Balance sheet exposure asset

(liability)  (note b)

 

 

 

As of

December 31,

2015

 

 

As of

December 31,

2016

 

 

As of

December 31,

2015

 

 

As of

December 31,

2016

 

Foreign exchange forward contracts denominated in:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States dollars (sell) Indian rupees (buy)

 

$

1,139,400

 

 

$

1,108,400

 

 

$

(48,197

)

 

$

6,669

 

United States dollars (sell) Mexican peso (buy)

 

 

8,520

 

 

 

9,120

 

 

 

(1,163

)

 

 

(187

)

United States dollars (sell) Philippines peso (buy)

 

 

58,500

 

 

 

70,050

 

 

 

(1,387

)

 

 

(1,036

)

Euro (sell) United States dollars (buy)

 

 

146,719

 

 

 

138,613

 

 

 

9,109

 

 

 

9,180

 

Euro (sell) Romanian leu (buy)

 

 

39,027

 

 

 

29,805

 

 

 

567

 

 

 

(152

)

Japanese yen (sell) Chinese renminbi (buy)

 

 

62,740

 

 

 

77,267

 

 

 

(1,379

)

 

 

(742

)

Pound sterling (sell) United States dollars (buy)

 

 

118,438

 

 

 

104,142

 

 

 

7,496

 

 

 

14,228

 

Australian dollars (sell) United States dollars (buy)

 

 

106,544

 

 

 

114,412

 

 

 

5,714

 

 

 

2,328

 

Interest rate swaps (floating to fixed)

 

 

—

 

 

 

456,810

 

 

 

—

 

 

 

7,746

 

 

 

 

 

 

 

 

 

 

 

 

(29,240

)

 

 

38,034

 

 

(a)

Notional amounts are key elements of derivative financial instrument agreements but do not represent the amount exchanged by counterparties and do not measure the Company’s exposure to credit or market risks. However, the amounts exchanged are based on the notional amounts and other provisions of the underlying derivative financial instrument agreements.

(b)

Balance sheet exposure is denominated in U.S. dollars and denotes the mark-to-market impact of the derivative financial instruments on the reporting date.

FASB guidance on derivatives and hedging requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the Balance Sheet. In accordance with the FASB guidance on derivatives and hedging, the Company designates foreign exchange forward contracts and interest rate swaps as cash flow

7. Derivative financial instruments (Continued)

hedges. Foreign exchange forward contracts are entered into to cover the effects of future exchange rate variability on forecasted revenue and purchases of services, and interest rate swaps are entered into to cover interest rate fluctuation risk. In addition to this program, the Company uses derivative instruments that are not accounted for as hedges under the FASB guidance in order to hedge foreign exchange risks related to balance sheet items, such as receivables and intercompany borrowings, that are denominated in currencies other than the Company’s underlying functional currency.
Fair Value of Derivative Instruments and Location in Financial Statements

The fair value of the Company’s derivative instruments and their location in the Company’s financial statements are summarized in the table below:

 

 

 

Cash flow hedges

 

 

Non-designated

 

 

 

As of

December 31,

2015

 

 

As of

December 31,

2016

 

 

As of

December 31,

2015

 

 

As of

December 31,

2016

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

$

17,400

 

 

$

33,921

 

 

$

884

 

 

$

809

 

Other assets

 

$

12,096

 

 

$

20,657

 

 

$

—

 

 

$

—

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrued expenses and other current liabilities

 

$

34,576

 

 

$

4,540

 

 

$

34

 

 

$

237

 

Other liabilities

 

$

25,010

 

 

$

12,576

 

 

$

—

 

 

$

—

 

 
Cash Flow Hedges, Gains (Losses) Recorded as Component of Other Comprehensive Income (Loss) or Other Comprehensive Income

In connection with cash flow hedges, the gains (losses) recorded as a component of other comprehensive income (loss), or OCI, and the related tax effects are summarized below:

 

 

 

Year ended December 31,

 

 

 

2014

 

 

2015

 

 

2016

 

 

 

Before-

tax

Amount

 

 

Tax

(Expense)

or

Benefit

 

 

Net of

tax

Amount

 

 

Before-

tax

Amount

 

 

Tax

(Expense)

or

Benefit

 

 

Net of

tax

Amount

 

 

Before-

tax

Amount

 

 

Tax

(Expense)

or

Benefit

 

 

Net of

tax

Amount

 

Opening balance as of January 1

 

$

(205,952

)

 

$

72,612

 

 

$

(133,340

)

 

$

(66,786

)

 

$

23,646

 

 

$

(43,140

)

 

$

(30,090

)

 

$

9,830

 

 

$

(20,260

)

Net gains (losses) reclassified into

   statement of  income on completion of

   hedged transactions

 

 

(49,161

)

 

 

17,498

 

 

 

(31,663

)

 

 

(42,106

)

 

 

15,346

 

 

 

(26,760

)

 

 

(6,799

)

 

 

409

 

 

 

(6,390

)

Changes in fair value of effective portion of outstanding derivatives, net

 

 

90,005

 

 

 

(31,468

)

 

 

58,537

 

 

 

(5,410

)

 

 

1,530

 

 

 

(3,880

)

 

 

60,752

 

 

 

(23,400

)

 

 

37,352

 

Gain (loss) on cash flow hedging

   derivatives, net

 

 

139,166

 

 

 

(48,966

)

 

 

90,200

 

 

 

36,696

 

 

 

(13,816

)

 

 

22,880

 

 

 

67,551

 

 

 

(23,809

)

 

 

43,742

 

Closing balance as of December 31

 

$

(66,786

)

 

$

23,646

 

 

$

(43,140

)

 

$

(30,090

)

 

$

9,830

 

 

$

(20,260

)

 

$

37,461

 

 

$

(13,979

)

 

$

23,482

 

 
Gains (Losses) Recorded as Component of Other Comprehensive Income (Loss) or Other Comprehensive Income

7. Derivative financial instruments (Continued)

 

The gains or losses recognized in other comprehensive income (loss) and their effects on financial performance are summarized below:

 

Derivatives in Cash Flow

Hedging Relationships

Amount of Gain (Loss)

recognized in OCI on

Derivatives (Effective

Portion)

 

 

 

Location of Gain

(Loss)

reclassified from

OCI into

Statement of

Income

(Effective

Portion)

 

Amount of Gain (Loss)

reclassified from OCI into

Statement of Income

(Effective Portion)

 

 

Year ended December 31,

 

 

 

 

 

Year ended December 31,

 

 

2014

 

 

2015

 

 

2016

 

 

 

 

 

2014

 

 

2015

 

 

2016

 

Forward foreign exchange

   contracts

$

90,005

 

 

$

(5,410

)

 

$

54,664

 

 

 

Revenue

 

$

(4,301

)

 

$

13,667

 

 

$

12,859

 

Interest rate swaps

 

—

 

 

 

—

 

 

 

6,088

 

 

 

Cost of revenue

 

 

(35,539

)

 

 

(44,634

)

 

 

(14,223

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and

administrative

expenses

 

 

(9,321

)

 

 

(11,139

)

 

 

(3,765

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

—

 

 

 

—

 

 

 

(1,670

)

 

$

90,005

 

 

$

(5,410

)

 

$

60,752

 

 

 

 

 

$

(49,161

)

 

$

(42,106

)

 

$

(6,799

)

 

Gain (loss) recognized in income on the ineffective portion of derivatives and the amount excluded from effectiveness testing is $0 as of December 31, 2014, 2015 and 2016.

Non-designated Hedges

 

Derivatives not designated as hedging

instruments

 

Location of Gain (Loss) recognized in Statement of

Income on Derivatives

 

Amount of Gain (Loss)

recognized in Statement of

Income on Derivatives

 

 

 

 

 

Year ended December 31,

 

 

 

 

 

2014

 

 

2015

 

 

2016

 

Forward foreign exchange

   contracts (Note a)

 

Foreign exchange gains (losses), net

 

$

287

 

 

$

6,566

 

 

$

2,921

 

 

 

 

 

$

287

 

 

$

6,566

 

 

$

2,921

 

 

(a)

These forward foreign exchange contracts were entered into to hedge fluctuations in foreign exchange rates for recognized balance sheet items, such as receivables and intercompany borrowings, and were not originally designated as hedges under FASB guidance on derivatives and hedging. Realized gains (losses) and changes in the fair value of these derivatives are recorded in foreign exchange gains (losses), net in the consolidated statements of income.