Derivative Financial Instruments
The Company's derivative financial instruments related to Currency Swaps that were terminated effective October 23, 2017 (refer to Note 13). Prior to termination the Currency Swaps were carried at fair value. The Company does not hold derivative financial instruments for trading or speculative purposes. The Company had designated certain cross currency swap agreements as qualifying hedging instruments and accounted for them as cash flow hedges pursuant to IAS 39, "Financial Instruments: Recognition and Measurement." These instruments subsequently became ineffective and therefore the Company no longer applied hedge accounting. The Company also had cross currency swap agreements where hedge accounting had not been applied.
Changes in the fair value of derivative financial instruments are reported in the consolidated statement of loss, except for foreign currency cash flow hedges that meet the conditions for hedge accounting. The portion of the gain or loss on the hedging instruments that are determined to be an effective hedge are recognized directly in other comprehensive loss, and the ineffective portion in the consolidated statement of loss. Gains or losses recognized in other comprehensive income are subsequently recognized in the statement of loss in the same period in which the hedged underlying transaction or firm commitment is recognized in the consolidated statement of loss.
In order to qualify for hedge accounting, the Company is required to document, at the inception of the hedge, the relationship between the item being hedged and the hedging instrument. The Company is also required to document and demonstrate an assessment of the relationship between the hedged item and the hedging instrument, which shows that the hedge will be highly effective on an ongoing basis. This effectiveness testing is performed at the end of each reporting period to ensure that the hedge remains highly effective.
