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Table of Contents <br />Our exposure to market interest rate risk is not hedged in a manner that completely eliminates the effects of changing market conditions on earnings or cash flow. See Notes 2 <br />"Summary of Significant Accounting Policies", 18 "Fair Value Measurement", and 19 "Derivative Instruments and Hedging Activities" included in Item 8 of this Report for <br />additional information about our derivative instruments. <br />Foreign Currency Risk <br />We have revenues, expenses, assets, and liabilities that are denominated in foreign currencies, principally the Canadian dollar, GBP, and Euro. Also, a significant number of <br />employees are located in Canada and Europe, and our subsidiaries in those countries transact business in those respective currencies. As a result, we have designated the <br />Canadian dollar as the functional currency for Canadian operations. Similarly, the GBP has been designated as the functional currency for our operations in the United <br />Kingdom. The Euro has been designated as the functional currency for our operations in Europe. When we consolidate the operations of these foreign subsidiaries into our <br />financial results, because we report our results in U.S. dollars, we are required to translate the financial results and position of our foreign subsidiaries from their respective <br />functional currencies into U.S. dollars. We translate the revenues, expenses, gains, and losses from our Canadian, United Kingdom, and European subsidiaries into U.S. dollars <br />using a weighted average exchange rate for the applicable fiscal period. We translate the assets and liabilities of these subsidiaries into U.S. dollars at the exchange rate in effect <br />at the applicable balance sheet date. Translation adjustments are not included in determining net income for the period but are disclosed and accumulated in a separate <br />component of consolidated equity until sale or until a complete or substantially complete liquidation of the net investment in our foreign subsidiary takes place. Changes in the <br />values of these items from one period to the next which result from exchange rate fluctuations are recorded in our consolidated statements of changes in stockholders' equity as <br />accumulated other comprehensive income (loss). For the year ended December 31, 2023, due to the weakening of the Canadian dollar and GBP versus the U.S. dollar, our <br />foreign currency translation resulted in a gain of $1.6 million which we recorded as an increase in accumulated other comprehensive income, compared to a loss of $3.4 million <br />for the year ended December 31, 2022. As a consequence, gross profit, operating results, profitability, and cash flows are impacted by relative changes in the value of the <br />Canadian dollar and GBP. We have not repatriated earnings from our foreign subsidiaries but have elected to invest in new business opportunities there. See Note 10, "Income <br />Taxes" to our consolidated financial statements in this Report. We do not hedge our exposure to foreign currency exchange risk. <br />41 <br />