Derivative Financial Instruments
|9 Months Ended|
Sep. 27, 2020
|Derivative Instruments And Hedging Activities Disclosure [Abstract]|
|Derivative financial instruments||
During the nine months ended September 27, 2020, the Company entered into forward foreign exchange contracts to reduce its exposure to foreign exchange currency rate fluctuations related to forecasted Mexican peso expenditures. These contracts were effective as hedges from an economic perspective, but do not meet the requirements for hedge accounting under ASC Topic 815 “Derivatives and Hedging”. Accordingly, changes in the fair value of these contracts were recognized into net income in the consolidated statement of operations and comprehensive income (loss). The Company had no outstanding forward foreign exchange contracts in the first nine months of 2019.
The following table presents a summary of the outstanding foreign currency forward contracts as at September 27, 2020:
The unrealized gain recognized in earnings as a result of revaluing the instruments to fair value on September 27, 2020 for the nine months period ended was $720 (September 29, 2019– $Nil) which was included in cost of sales in the interim consolidated statement of operations and comprehensive income (loss). Fair value is 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 average contract and mark-to-market rates for outstanding forward foreign exchange contracts were as follows:
The derivative assets were $720 as at September 27, 2020 (September 29, 2019 –Nil) which reflected the fair market value of the unsettled forward foreign exchange contracts. There was no derivative liability as at September 27, 2020 or September 29, 2019.
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://fasb.org/us-gaap/role/ref/legacyRef