Derivative Instruments and Hedging Activities

9 Months Ended

Jun. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

NOTE 15: DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Our earnings and financial position are affected by changes in gold values. In fiscal year 2012, we used derivative financial instruments in order to manage our commodity price risk associated with the forecasted sales of gold scrap. These derivatives were not designated as hedges, and according to FASB ASC 815-20-25, “Derivatives and Hedging – Recognition,” changes in their fair value were recorded directly in earnings. As of June 30, 2013 and 2012 and as of September 30, 2012, we did not have an outstanding balance of non-designated derivatives recorded on our balance sheet.

In the current quarter, Grupo Finmart completed a $30 million cross-border debt offering for which it has to pay interest on a semiannual basis at a fixed rate. Grupo Finmart used derivative instruments (cross currency forwards) to manage its exposure related to changes in exchange rate. Grupo Finmart does not enter into derivative instruments for any purpose other than cash flow hedging.

Changes in the fair value of forward agreements designated as hedging instruments that effectively offset the variability of cash flows associated with exchange rate are reported in accumulated other comprehensive income. These amounts subsequently are reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

We assess the effectiveness of the hedges using linear regression for prospective testing, and the dollar offset method for retrospective testing. A hypothetical derivative with fair value of zero is created at the beginning of the hedge relationship; changes in actual derivative and hypothetical derivatives are used to carry out both testings.

The following tables set forth certain information regarding our derivative instruments:

		Fair Value of Derivative Instruments
Derivative Instrument	Balance Sheet Location	June 30, 2013		June 30, 2012		September 30, 2012
		(in thousands)
Designated as cash flow hedging instruments:
Foreign currency forwards	Other assets, net	$	2,395	$	—	$	—

		Amount of (Gain) Recognized in Income
		Three Months Ended June 30,				Nine Months Ended June 30,
Derivative Instrument	Location of (Gain)	2013		2012		2013			2012
		(in thousands)
Non-designated derivatives:
Gold Collar	Other income	$	—	$	—	$	(151	)	$	—

		Amount of (Gain) Recognized in Other Comprehensive Income on Derivatives (Effective Portion)
		Three Months Ended June 30,					Nine Months Ended June 30,
Derivative Instrument	Location of (Gain)	2013			2012		2013			2012
		(in thousands)
Designated as cash flow hedging instruments:
Foreign currency forwards	Effective portion of cash flow hedge	$	(500	)	$	—	$	(500	)	$	—

		Amount of (Gain) Loss on Derivatives Reclassified into Income from Accumulated Other Comprehensive Income (Effective Portion)
		Three Months Ended June 30,					Nine Months Ended June 30,
Derivative Instrument	Location of (Gain)	2013			2012		2013			2012
		(in thousands)
Designated as cash flow hedging instruments:
Foreign currency forwards	Other income	$	(1,888	)	$	—	$	(1,888	)	$	—

		Amount of (Gain) on Derivatives Recognized in Income (Ineffective Portion Excluded from Effectiveness Testing)
		Three Months Ended June 30,					Nine Months Ended June 30,
Derivative Instrument	Location of (Gain)	2013			2012		2013			2012
		(in thousands)
Designated as cash flow hedging instruments:
Foreign currency forwards	Other income	$	(41	)	$	—	$	(41	)	$	—