Annual and transition report of foreign private issuers pursuant to Section 13 or 15(d)

Derivatives and Hedging Activities

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Derivatives and Hedging Activities
 12 Months Ended
Dec. 31, 2015
Derivatives and Hedging Activities [Abstract]  
Derivatives and Hedging Activities

Note 12. Derivatives and Hedging Activities

The Company carries out transactions involving foreign currency exchange derivative financial instruments. The transactions are designed to hedge the Company's exposure in currencies other than the U.S. dollar. The Company is primarily exposed to foreign exchange risk with respect to recognized assets and liabilities and forecasted transactions denominated in the New Israeli Shekel (“NIS”), the Euro and the Japanese Yen. The Company manages its foreign currency exposures on a consolidated basis, which allows the Company to net exposures and take advantage of any natural hedging. In addition, the Company uses derivative instruments to reduce the net exposure to foreign exchange. Gains and losses on the hedging instruments offset losses and gains on the hedged items. Financial markets and currency volatility may limit the Company's ability to hedge these exposures.

The following table summarizes the consolidated balance sheets classification and fair values of the Company's derivative instruments:

 

  Fair Value   Notional Amount
  December 31,   December 31,   December 31,   December 31,
  Balance sheet location   2015   2014   2015   2014
                     
  (U.S. $ in thousands)
Assets derivatives -Foreign exchange contracts, not                              
designated as hedging instruments   Other current assets   $ 866   $ 3,753   $ 54,586   $ 45,000
Assets derivatives -Foreign exchange contracts,                              
designated as cash flow hedge   Other current assets   23   -   2,700   -
Liability derivatives -Foreign exchange contracts, not     Accrued expenses and                        
designated as hedging instruments   other current liabilities   (432)   (2,901)   35,036   18,424
Liability derivatives -Foreign exchange contracts,     Accrued expenses and                        
designated as cash flow hedge   other current liabilities   (131)   (1,243)   13,682   38,426
                             
    $ 326   $ (391)   $ 106,004   $ 101,850

As of December 31, 2015, the Company had in effect foreign exchange forward contracts, not designated as hedging instruments for the conversion of $74.8 million, $7.8 million and $7.0 million into Euro, NIS and Japanese Yen, respectively. These derivatives are primarily used to reduce the exposure of foreign currency fluctuations on certain balance sheet items. With respect to such derivatives, gains of $4.9 million and $4.4 million were recognized under financial expense, net for the years ended December 31, 2015 and 2014, respectively. Such gains partially offset the revaluation losses of the balance sheet items, which are also recognized under financial expense, net.

As of December 31, 2015 and 2014, the Company had in effect foreign exchange forward contracts for the conversion of $16.4 million and $38.4 million, respectively, into NIS. These foreign exchange forward contracts were designated as cash flow hedge for accounting purposes. The Company uses short-term cash flow hedge contracts to reduce its exposure to variability in expected future cash flows resulting mainly from payroll costs denominated in New Israeli Shekels. The changes in fair value of those contracts are included in the Company's accumulated other comprehensive loss. These contracts mature through December, 2016.