Note 3 – Operations in Foreign Currency

We have significant assets in Australia and New Zealand. Historically, we have conducted 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 June 30, 2018. 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.

Due to the natural-hedge nature of our funding policy, we have not historically used derivative financial instruments to hedge against the risk of foreign currency exposure. However, in certain circumstances, we move funds between jurisdictions where circumstances encouraged us to do so from an overall economic standpoint. Going forward, particularly in light of recent tax law changes, we intend to take a more global view of our financial resources, and to be more flexible in making use of resources from one jurisdiction in other jurisdictions.

As of December 31, 2016, we determined that certain historically long-term intercompany loans from our parent company (Reading International, Inc.), to our Australian subsidiary were short-term in nature. Subsequently, on September 1, 2017, we determined that the remaining AU$21.1 million intercompany loans originally classified as long-term should be considered as short-term as well. These loans were paid in full on December 21, 2017. We recognized a foreign exchange gain on these intercompany advances based on the relative strengthening of the Australian dollar to the U.S. dollar in the amount of $825,000 for the six months ended June 30, 2017 in our Consolidated Statements of Income. No further foreign exchange gains or losses were recognized in the first six months of 2018 in relation to these loans.

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


	Foreign Currency / USD
	As of and for the quarter ended	As of and for the six months ended	As of and for the twelve months ended	As of and for the quarter ended	As of and for the six months ended
	June 30, 2018		December 31, 2017	June 30, 2017
Spot Rate
Australian Dollar	0.7399		0.7815	0.7676
New Zealand Dollar	0.6773		0.7100	0.7322
Average Rate
Australian Dollar	0.7569	0.7715	0.7670	0.7511	0.7547
New Zealand Dollar	0.7046	0.7161	0.7111	0.7049	0.7086