Company: IPAR
Filing Date: 2025-11-05
Form Type: 10-Q
Source: 0001753926-25-001703
Chunk: 37

Company: INTERPARFUMS INC
Filing Date: 2025-11-05
Form: 10-Q
Item: Part I, Item 7
Chunk 37
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 of the swaps using third party quotes from financial institutions.

6.
Derivative
                                         Financial Instruments:

The
Company enters into foreign currency forward exchange contracts to hedge exposure related to receivables denominated in a foreign
currency and occasionally to manage risks related to future sales expected to be denominated in a foreign currency. Before entering
into a derivative transaction for hedging purposes, we determine that a high degree of initial effectiveness exists between
the change in value of the hedged item and the change in the value of the derivative instrument from movement in exchange rates.
High effectiveness means that the change in the cash flows of the derivative instrument will effectively offset the change in
the cash flows of the hedged item. The effectiveness of each hedged item is measured throughout the hedged period and is based
on the dollar offset methodology and excludes the portion of the fair value of the foreign currency forward exchange contract
attributable to the change in spot-forward difference which is reported in current period earnings. Any hedge ineffectiveness
is also recognized as a gain or loss on foreign currency in the income statement. For contracts designated as hedges that are no longer deemed
highly effective, hedge accounting is discontinued, and gains and losses accumulated in other comprehensive income are reclassified
to earnings. If it is probable that the forecasted transaction will no longer occur, then any gains or losses accumulated
in other comprehensive income are reclassified to current-period earnings. 
 
In
December 2022, to finance the acquisition of the Lacoste trademark, the Company entered into a €50 million (approximately
$58.7 million) 4-year term loan with a variable interest rate. This variable rate debt was swapped for variable interest rate
debt with a maximum rate of 2% per annum. This swap is a hedged derivative instrument and is therefore recorded at fair value
and changes in fair value are reflected in the accompanying consolidated statements of comprehensive income.
 
In
connection with the April 2021 acquisition of the office building complex in Paris, €120 million (approximately $140.9 million)
of the purchase price was financed through a 10-year variable rate term loan. The Company entered into interest rate swap contracts related
to €80 million of the loan, effectively exchanging the variable interest rate to a fixed rate of approximately 1.1%. This
derivative instrument is recorded at fair value and changes in fair value are reflected in the accompanying consolidated statements
of income.
 
Gains
and losses in derivatives designated as