Virgin Media 2010 Annual Report Download - page 87

Interest Rate Swaps
We have entered into a number of interest rate swaps to mitigate the risk relating to the variability in future
interest payments on our senior credit facility, which accrues interest at variable rates based on LIBOR. For the
period July 2012 through December 2015 these interest rate swaps will allow us to receive interest based on
LIBOR in exchange for payments of interest at fixed rates between 2.7925% and 2.91%.
We have designated some of the interest rate swaps as cash flow hedges because they hedge against changes
in LIBOR. All interest rate swaps are recognized as either assets or liabilities and measured at fair value.
Changes in the fair value are recorded within other comprehensive income (loss) where designated as an
accounting hedge, or through (loss) gain on derivatives where not designated as an accounting hedge. The
amounts initially recorded in other comprehensive income (loss) are then recorded in the statement of operations
when the underlying hedged item impacts the statement of operations.
Cross-currency Interest Rate Swaps
We have entered into a number of cross-currency interest rate swaps to mitigate the risk relating to the
variability in the pound sterling value of interest payments on the U.S. dollar and euro denominated 9.125% and
9.50% senior notes due 2016, interest payments on the U.S. dollar denominated 6.50% senior secured notes due
2018 and interest payments on the U.S. dollar denominated 8.375% senior notes due 2019. Under these
cross-currency interest rate swaps, we receive interest in U.S. dollars at various fixed rates and in euros at various
fixed rates in exchange for payments of interest in pounds sterling at various fixed rates.
We have designated some of the cross-currency interest rate swaps as cash flow hedges because they hedge
against changes in the pound sterling value of the interest payments on the senior notes that result from changes
in the U.S. dollar and euro exchange rates. All cross-currency interest rate swaps are recognized as either assets
or liabilities and measured at fair value. Changes in the fair value of these instruments are initially recorded
within other comprehensive income (loss) where designated as an accounting hedge, or through (loss) gain on
derivatives where not designated as an accounting hedge. The amounts initially recorded in other comprehensive
income (loss) are then recorded in the statement of operations when the underlying hedged item impacts the
statement of operations.
Foreign Currency Forward Contracts
We have entered into a number of forward contracts to mitigate the foreign exchange rate risk in payable
obligations that are not denominated in pounds sterling. We have designated certain, but not all, of these
contracts as accounting hedges. Changes in the fair value of these instruments are initially recorded within other
comprehensive income (loss) where designated as an accounting hedge, or through (loss) gain on derivatives
where not designated as an accounting hedge. The amounts initially recorded in other comprehensive
income (loss) are then recorded in the statement of operations when the underlying hedged item impacts the
statement of operations.
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