Derivative Financial Instruments

The Company manages some of its foreign currency exchange rate risk through the purchase of foreign currency exchange contracts that hedge against the short-term effect of currency fluctuations. The Company’s policy is to enter into foreign currency forward contracts with maturities less than 12 months that mitigate the effect of rate fluctuations on certain local currency denominated operating expenses. All derivative instruments are recorded at fair value in either prepaid expenses and other current assets or accrued liabilities. The Company reports cash flows from derivative instruments in cash flows from operating activities. The Company uses quoted prices to value its derivative instruments. There were no outstanding forward contracts at the year ended February 3, 2018. The notional amounts of outstanding forward contracts was $63.5 million at January 28, 2017 and consisted of Israeli shekel buy contracts.

Cash Flow Hedges. The Company designates and documents its foreign currency forward exchange contracts as cash flow hedges for certain operating expenses. The Company evaluates and calculates the effectiveness of each hedge at least quarterly. The effective change is recorded in accumulated other comprehensive income and is subsequently reclassified to operating expense when the hedged expense is recognized. Ineffectiveness is recorded in interest and other income, net.

The following table provides information about gains (losses) associated with our derivative financial instruments (in thousands):



	Location of Gains (Losses) in Statement of Operations	Amount of Gains (Losses) in Statement of Operations for the Year Ended
	Location of Gains (Losses) in Statement of Operations	February 3, 2018		January 28, 2017		January 30, 2016
Derivatives designated as cash flow hedges:
Forward contracts:	Research and development	$	3,223	$	737	$	(390	)
	Selling, general and administrative	723		101		(31		)
		$	3,946	$	838	$	(421	)

The amounts of gains (losses) associated with the Company's derivative financial instruments reclassified from accumulated other comprehensive income (loss) are presented in the following table (in thousands):



	Year Ended
Affected Line Item in the Statement of Operations	February 3, 2018		January 28, 2017		January 30, 2016
Operating costs and expenses:
Cash flow hedges:
Research and development	$	2,564	$	467	$	48
Selling, general and administrative	601		66		16
Total	$	3,165	$	533	$	64

The portion of gains (losses) excluded from the assessment of hedge effectiveness is included in interest and other income, net, were not material in fiscal 2018, 2017 and 2016. The Company did not have hedge ineffectiveness from derivative financial instruments in fiscal 2018, 2017 and 2016. No cash flow hedges were terminated as a result of forecasted transactions that did not occur.