Hedging

The Company maintains a hedging program intended to mitigate the effect of changes in foreign exchange rates for a portion of the Company’s forecasted product revenues denominated in certain foreign currencies. The program includes foreign currency forward contracts that are designated as cash flow hedges under GAAP having contractual durations from one to eighteen months.

The Company formally documents the relationship between foreign currency forward contracts (hedging instruments) and forecasted product revenues (hedged items), as well as the Company’s risk management objective and strategy for undertaking various hedging activities, which includes matching all foreign currency forward contracts that are designated as cash flow hedges to forecasted transactions. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the foreign currency forward contracts are highly effective in offsetting changes in cash flows of hedged items on a prospective and retrospective basis. If the Company determines that a (i) foreign currency forward contract is not highly effective as a cash flow hedge, (ii) foreign currency forward contract has ceased to be a highly effective hedge or (iii) forecasted transaction is no longer probable of occurring, the Company would discontinue hedge accounting treatment prospectively. The Company measures effectiveness based on the change in fair value of the forward contracts and the fair value of the hypothetical foreign currency forward contracts with terms that match the critical terms of the risk being hedged. As of September 30, 2017, all hedges were determined to be highly effective and the Company had not recorded any ineffectiveness related to the hedging program.

The following table summarizes the notional amount of the Company’s outstanding foreign currency forward contracts designated as cash flow hedges under GAAP:



	As of September 30, 2017		As of December 31, 2016
Foreign Currency	(in thousands)
Euro	$	234,477	$	164,368
British pound sterling	77,387		65,237
Australian dollar	31,283		23,776
Total foreign currency forward contracts	$	343,147	$	253,381

The following table summarizes the fair value of the Company’s outstanding foreign currency forward contracts designated as cash flow hedges under GAAP included on the Company’s condensed consolidated balance sheets:



As of September 30, 2017
Assets			Liabilities
Classification	Fair Value		Classification	Fair Value
(in thousands)
Prepaid and other current assets	$	42	Other liabilities, current portion	$	(13,897	)
Other assets	8		Other liabilities, excluding current portion	(977		)
Total assets	$	50	Total liabilities	$	(14,874	)



As of December 31, 2016
Assets			Liabilities
Classification	Fair Value		Classification	Fair Value
(in thousands)
Prepaid and other current assets	$	14,407	Other liabilities, current portion	$	(144	)
Other assets	1,186		Other liabilities, excluding current portion	—
Total assets	$	15,593	Total liabilities	$	(144	)

As of September 30, 2017, the Company expects amounts recorded in prepaid and other currents assets and other liabilities, current portion to be reclassed to earnings within twelve months.

The following table summarizes the potential effect of offsetting derivatives by type of financial instrument designated as cash flow hedges under GAAP on the Company’s condensed consolidated balance sheets:



	As of September 30, 2017
	Gross Amounts Recognized			Gross Amounts Offset		Gross Amounts Presented			Gross Amounts Not Offset			Legal Offset
Foreign currency forward contracts	(in thousands)
Total assets	$	50		$	—	$	50		$	(50	)	$	—
Total liabilities	$	(14,874	)	$	—	$	(14,874	)	$	50		$	(14,824	)



	As of December 31, 2016
	Gross Amounts Recognized			Gross Amounts Offset		Gross Amounts Presented			Gross Amounts Not Offset			Legal Offset
Foreign currency forward contracts	(in thousands)
Total assets	$	15,593		$	—	$	15,593		$	(144	)	$	15,449
Total liabilities	$	(144	)	$	—	$	(144	)	$	144		$	—

The Company also enters into foreign exchange forward contracts with contractual maturities of less than one month designed to mitigate the effect of changes in foreign exchange rates on monetary assets and liabilities including intercompany balances. The Company recognized losses of $4.1 million and $13.0 million, recorded in other income (expense), net, for the three and nine months ended September 30, 2017, respectively, related to foreign exchange contracts, which are not designated as hedging instruments under GAAP. The Company recognized a loss of $1.2 million and a gain of $0.5 million, for the three and nine months ended September 30, 2016, respectively, related to foreign exchange contracts not designated as hedging instruments.

As of September 30, 2017, the notional amount of foreign exchange contracts where hedge accounting under GAAP is not applied was $113.8 million. The following table summarizes the fair value of the Company’s outstanding foreign currency forward contracts not designated for hedge accounting included on the Company’s condensed consolidated balance sheets:



	As of September 30, 2017		As of December 31, 2016
	(in thousands)
Prepaid expenses and other current assets	$	1,709	$	660