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Derivatives
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3 Months Ended |
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Nov. 30, 2013
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| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
| Derivatives |
Derivatives
All derivatives are recognized in the balance sheet at their estimated fair value. On the date it enters into a derivative contract, the Company 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 fair value of outstanding foreign currency derivatives was a liability of $0.6 million and an asset of $0.1 million at November 30, 2013 and August 31, 2013, respectively.
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 hedged portions of its forecasted inventory purchases that are denominated in non-functional currencies through cash flow hedges. The U.S. dollar equivalent notional value of these foreign currency forward contracts was $5.5 million and $9.7 million, at November 30, 2013 and August 31, 2013, respectively. At November 30, 2013, unrealized losses of $0.2 million were included in accumulated other comprehensive loss and are expected to be reclassified to earnings during the next twelve months.
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 was $404.4 million and $383.6 million, at November 30, 2013 and August 31, 2013, respectively. Net foreign currency losses related to these derivative instruments was $8.7 million for the three months ended November 30, 2013, compared to a $0.6 million gain for the three months ended November 30, 2012. These derivative gains and losses offset foreign currency gains and losses from the related revaluation on non-functional currency assets and liabilities (amounts included in other income and expense in the condensed consolidated statement of earnings).
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