Note 9 - Derivative Financial Instruments
|9 Months Ended|
Oct. 02, 2016
|Notes to Financial Statements|
|Derivative Instruments and Hedging Activities Disclosure [Text Block]||
The Company enters into forward foreign exchange contracts to reduce its exposure to foreign exchange currency rate fluctuations related to forecasted Canadian dollar and Mexican Peso denominated payroll, rent and utility cash flows for the three remaining months of fiscal 2016 and a portion of the first nine months of fiscal 2017. These contracts are effective economic hedges but do not qualify for hedge accounting under ASC 815 “Derivatives and Hedging”. Accordingly, changes in the fair value of these derivative contracts are recognized into cost of sales in the consolidated statement of operations and comprehensive income (loss). The Company does not enter into forward foreign exchange contracts for trading or speculative purposes.
The following table presents a summary of the outstanding foreign currency forward contracts as at October 2, 2016:
The unrealized loss recognized in earnings for the three month period as a result of revaluing the outstanding instruments to fair value on October 2, 2016 was $4 (September 27, 2015 – unrealized loss $805), and the unrealized gain for the nine month period ended October 2, 2016 was $995 (September 27, 2015 – unrealized loss $334), which was included in cost of sales in the consolidated statement of operations and comprehensive income (loss). The realized loss on the settled contracts for the three months period ended October 2, 2016 was $619 (September 27, 2015 – realized loss $1,237), and the realized loss for the nine month period ended October 2, 2016 was $2,197 (September 27, 2015 – realized loss $3,119), which is included in cost of sales in the consolidated statement of operations and comprehensive income (loss). Fair value was determined using the market approach with valuation based on market observables (Level 2 quantitative inputs in the hierarchy set forth under ASC 820 “Fair Value Measurements”).
The derivative asset as at October 2, 2016 was $83 ($Nil as at January 3, 2016) and derivative liability as at October 2, 2016 was $1,175 ($2,087 as at January 3, 2016) which reflected the fair market value of the unsettled forward foreign exchange contracts.
The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.
Reference 1: http://www.xbrl.org/2003/role/presentationRef