AMDOCS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (dollar and share amounts in thousands, except per share data) Cash Flow Hedges F-21 The effective portion of the gain or loss on the derivative instruments is initially recorded as a component of other comprehensive income (loss), a separate component of shareholders’ equity, and subsequently reclassified into earnings in the same line item as the related forecasted transaction and in the same period or periods during which the hedged exposure affects earnings. The cash flow hedges are evaluated for effectiveness at least quarterly. As the critical terms of the forward contract or option and the hedged transaction are matched at inception, the hedge effectiveness is assessed generally based on changes in the fair value for cash flow hedges, as compared to the changes in the fair value of the cash flows associated with the underlying hedged transactions. Hedge ineffectiveness, if any, and hedge components, such as time value, excluded from assessment of effectiveness testing for hedges of estimated revenue from customers, are recognized immediately in interest and other expense, net. In order to reduce the impact of changes in foreign currency exchange rates on its results, the Company enters into foreign currency exchange forward and option contracts to purchase and sell foreign currencies to hedge a significant portion of its foreign currency net exposure resulting from revenue and expense transactions denominated in currencies other than the U.S. dollar. The Company designates these contracts for accounting purposes as cash flow hedges. The Company currently hedges its exposure to the variability in future cash flows for a maximum period of two years (a significant portion of the forward and option contracts outstanding as of September 30, 2013 is expected to mature within the next 12 months). The Company records all derivative instruments on the balance sheet at fair value. For further information, please see Note 4 to the consolidated financial statements. The fair value of the open foreign exchange contracts recorded by the Company on its consolidated balance sheets as of September 30, 2013 and September 30, 2012, as an asset or a liability is as follows: As of September 30, 2013 2012 Derivatives designated as hedging instruments Prepaid expenses and other current assets ........................... $21,595 $ 855 Other noncurrent assets ......................................... 3,134 1,453 Accrued expenses and other current liabilities ........................ (11,641) (20,087) Other noncurrent liabilities ....................................... (5,567) (4,166) 7,521 (21,945) Derivatives not designated as hedging instruments Prepaid expenses and other current assets ........................... 2,688 1,507 Accrued expenses and other current liabilities ........................ (2,671) (3,490) 17 (1,983) Net fair value ................................................... $ 7,538 $(23,928)