Annual report pursuant to Section 13 and 15(d)

Derivatives

v3.8.0.1
Derivatives
 12 Months Ended
Aug. 31, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives
All derivatives are recognized in the balance sheet at their estimated fair value. On the date the Company enters into a derivative contract, it designates the derivative as a hedge of a recognized asset or liability (fair value hedge) or a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). The Company does not enter into derivatives for speculative purposes. Changes in the value of fair value hedges and non-designated hedges are recorded in earnings along with the gain or loss on the hedged asset or liability, while changes in the value of cash flow hedges are recorded in accumulated other comprehensive loss, until earnings are affected by the variability of cash flows.
The Company is exposed to market risk for changes in foreign currency exchange rates due to the global nature of its operations. In order to manage this risk the Company has historically hedged portions of its forecasted inventory purchases and other cash flows that are denominated in non-functional currencies (cash flow hedges). However, there were no cash flow hedges outstanding at August 31, 2017 and 2016.
The Company also utilizes forward foreign currency exchange contracts to reduce the exchange rate risk associated with recognized non-functional currency balances. The effects of changes in exchange rates are reflected concurrently in earnings for both the fair value of the foreign currency exchange contracts and the related non-functional currency asset or liability. The U.S. dollar equivalent notional value of these short duration foreign currency forward contracts (fair value hedges or non-designated hedges) was $22.0 million and $143.4 million, at August 31, 2017 and 2016, respectively. The fair value of outstanding foreign currency exchange contracts was a liability of $0.2 million and $0.7 million at August 31, 2017 and 2016, respectively. Net foreign currency losses related to these derivative instruments are as follows (in thousands):
 
Year Ended August 31,
 
2017
 
2016
 
2015
Foreign currency losses, net
$
(2,962
)
 
$
(1,520
)
 
$
(95
)