Derivatives and Hedging

3 Months Ended

Mar. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

In the normal course of business, the Company is exposed to gains and losses resulting from fluctuations in foreign currency exchange rates. As part of its strategy to manage the level of exposure to the risk of fluctuations in foreign currency exchange rates, the Company uses designated cash flow hedges in the form of foreign currency forward contracts to mitigate the impact of foreign currency translation on transactions that are denominated primarily in the Euro and the Chinese Yuan. The Company also uses non-designated forward contracts to hedge non-functional currency denominated balance sheet assets. Hedging relationships for all derivative hedges and the underlying hedged items, as well as the risk management objectives and strategies for undertaking the hedge transactions are formally documented. The Company does not use any derivative financial instruments for trading or other speculative purposes.

Such foreign currency forward contracts are carried at fair value in prepaid expenses and other current assets or other current liabilities depending on the unrealized gain or loss position of the hedged contract as of the balance sheet date. Changes in the value of the derivatives are recorded to other comprehensive income (loss) until the underlying hedged item is recognized in earnings, or the derivative no longer qualifies as a highly effective hedge. The cash flows from derivatives treated as hedges are classified in the Consolidated Statements of Cash Flows in the same category as the item being hedged.

The notional principal amounts for outstanding derivative instruments provide one measure of the transaction volume outstanding and do not represent the amount of the Company’s exposure to credit or market loss. Credit risk represents the Company’s gross exposure to potential accounting loss on derivative instruments that are outstanding or unsettled if all counterparties failed to perform according to the terms of the contract, based on then-current currency exchange rates at each respective date. The Company generally enters into master netting arrangements that reduce credit risk by permitting net settlement of transactions with the same counterparty. The Company presents its derivative assets and derivative liabilities at their net fair values. The Company does not have any derivative instruments with credit-risk related contingent features that would require it to post collateral.

The following table summarizes the fair value and notional amounts of designated and non-designated foreign currency forward contracts as of March 31, 2022 and December 31, 2021 (in thousands):


	March 31, 2022				December 31, 2021
	Notional Amount		Fair Value, Net		Notional Amount		Fair Value, Net
Designated cash flow hedges:
Prepaid expenses and other current assets	$	4,593	$	219	$	—	$	84
Other current liabilities	$	2,409	$	29	$	17,629	$	139

Non-designated forward contracts:
Prepaid expenses and other current assets	$	22,548	$	38	$	—	$	—
Other current liabilities	$	—	$	—	$	15,809	$	130

QUIDEL CORP /DE/ 10-Q