Note 3 – Operations in Foreign Currency

We have significant assets in Australia and New Zealand. To the extent possible, we conduct our Australian and New Zealand operations (collectively “foreign operations”) on a self-funding basis where we use cash flows generated by our foreign operations to pay for the expense of foreign operations. Our Australian and New Zealand assets and liabilities are translated from their functional currencies of Australian dollar (“AU$”) and New Zealand dollar (“NZ$”), respectively, to the U.S. dollar based on the exchange rate as of September 30, 2017. The carrying value of the assets and liabilities of our foreign operations fluctuates as a result of changes in the exchange rates between the functional currencies of the foreign operations and the U.S. dollar. The translation adjustments are accumulated in the Accumulated Other Comprehensive Income in the Consolidated Balance Sheets.

As indicated previously, our overall operating strategy is to conduct business mostly on a self-funding basis (except for funds used to pay an appropriate share of our U.S. corporate overhead). As such, we do not use derivative financial instruments to hedge against the risk of foreign currency exposure. However, in certain circumstances, we may decide to move funds between jurisdictions where circumstances encouraged us to do so from an overall economic standpoint. As of December 31, 2016, we determined certain intercompany advances from the U.S. Parent Company to our Australian subsidiary should be considered short-term.

Subsequently, on September 1, 2017, we determined that the remaining AU$21.1 million in long-term intercompany loans should be considered as short-term as well. Such assessment was made on the basis of global funding opportunities, which were not present as of December 31, 2016.

As a result, we recognized foreign exchange gain on these intercompany advances based on the relative strengthening of the Australian dollar to the U.S. dollar in the amounts of $910,000 for the nine months ended September 30, 2017 in our Consolidated Statements of Income.

Presented in the table below are the currency exchange rates for Australia and New Zealand:


	Foreign Currency / USD
	September 30, 2017		December 31, 2016	September 30, 2016
	As of and for the quarter ended	As of and for the nine months ended	As of and for the twelve months ended	As of and for the quarter ended	As of and for the nine months ended
Spot Rate
Australian Dollar	0.7840		0.7230	0.7667
New Zealand Dollar	0.7225		0.6958	0.7290
Average Rate
Australian Dollar	0.7899	0.7664	0.7440	0.7583	0.7420
New Zealand Dollar	0.7307	0.7159	0.6973	0.7226	0.6926