Quarterly report pursuant to Section 13 or 15(d)

Derivative Financial Instruments

Derivative Financial Instruments
3 Months Ended
Mar. 30, 2019
Derivative Financial Instruments [Abstract]  
Derivative Financial Instruments


The Companys risk management strategy includes the select use of derivative instruments to reduce the effects of volatility in foreign currency exchange exposure on operating results and cash flows. In accordance with the Companys risk management policies, the Company does not hold or issue derivative instruments for trading or speculative purposes. The Company recognizes all derivative instruments as either assets or liabilities in the balance sheet at their respective fair values. When the Company becomes a party to a derivative instrument and intends to apply hedge accounting, the Company formally documents the hedge relationship and the risk management objective for undertaking the hedge, the nature of risk being hedged, and the hedged transaction, which includes designating the instrument for financial reporting purposes as a fair value hedge, a cash flow hedge, or a net investment hedge. The Company also documents how the hedging instruments effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively, and a description of the method used to measure ineffectiveness.

The Company periodically uses derivative hedging instruments to hedge its net investment in its non U.S. subsidiaries designed to hedge a portion of the foreign currency exposure that arises on translation of the foreign subsidiaries into U.S. dollars. Initially, the Company records derivative assets on a gross basis in our consolidated balance sheets. Subsequently the fair value of derivatives is measured for each reporting period.  The effective portion of gains and losses attributable to these net investment hedges is recorded to foreign currency translation adjustment (FCTA) within accumulated other comprehensive income (loss) (AOCI) to offset the change in the carrying value of the net investment being hedged, and will subsequently be reclassified to net earnings in the period in which the hedged investment is either sold or substantially liquidated.

As of December 29, 2018, there were no derivatives outstanding for which the Company has applied hedge accounting.  During the first quarter of 2019, the Company entered into a European option designated as a net investment hedge with a notional value of $110,000.  As of March 30, 2019, the Company had recorded an unrealized a loss of $986, which is recorded to FCTA within AOCI.  The Company assessed hedge effectiveness under the forward rate method, determining the hedging instrument was highly effective.