Virgin Media 2012 Annual Report Download - page 101

F-30
Fair Value Hedging
For derivative instruments that are designated in qualifying fair value Accounting Hedge relationships, changes in the
fair value of the derivatives, inclusive of counterparty risk, are included in gains (losses) on derivatives in net income
in other comprehensive income along with changes in the fair value of the hedged debt obligations due to changes in
the hedged risk. The difference between this gain or loss and changes in the fair value of the hedged debt obligations
due to changes in the hedged risk is referred to as hedge ineffectiveness. In our consolidated balance sheets, changes
in the value of the hedged debt obligations due to changes in the hedged risk are included as adjustments to the
carrying value of the debt.
In our consolidated statement of cash flows, we recognize the cash flows resulting from derivative contracts that are
treated as Accounting Hedges in the same category where the cash flows from the underlying exposure are recognized.
Cash flows from derivative contracts, that are not treated as Accounting Hedges, are recognized as operating activities
in the consolidated statement of cash flows.
Gains or losses representing either hedge ineffectiveness or hedge components excluded from the assessment of
effectiveness are recognized as gains or losses on derivative instruments in net income in the consolidated statements
of comprehensive income in the period in which they occur. During the years ended December 31, 2012, 2011 and
2010, we recognized hedge ineffectiveness (losses) gains of £(4.2) million, £3.7 million and £0.0 million, respectively.
Note 9—Stock-Based Compensation Plans
At December 31, 2012, we had a number of stock-based compensation plans, which are described below. In the years
ended December 31, 2012, 2011 and 2010, the compensation cost that has been charged against income for these
plans was £20.9 million, £22.5 million and £29.4 million, respectively. All our stock-based awards granted under our
long term incentive plans or individual employment agreements are issued under our Stock Incentive Plans or our
Sharesave Plan which have been approved by our stockholders.
Virgin Media Stock Incentive Plans
The Virgin Media Inc. stock incentive plans are intended to encourage Virgin Media stock ownership by employees
and directors so that they may acquire or increase their proprietary interest in our company, to encourage such
employees and directors to remain in our employ or service and to put forth maximum efforts for the success of the
business. To accomplish these purposes, the plans provide that we may grant incentive stock options, nonqualified
stock options, restricted stock, restricted stock units, performance share awards and stock awards.
Under the Virgin Media Inc. 2010 Stock Incentive Plan, under which subsequent options have been issued, options to
purchase up to 29.0 million shares of our common stock may be granted from time to time to certain of our employees.
Accordingly, we have reserved 29.0 million shares of common stock for issuance under the Virgin Media Inc. 2010
Stock Incentive Plan.
Virgin Media Sharesave Plan
The Virgin Media Sharesave Plan is a broad based stock option arrangement which enables eligible employees to
receive options to purchase shares of our common stock at a discount. Employees are invited to take out savings
contracts that last for three, five, or seven years. At the end of the contract, employees use the proceeds of these
savings to exercise options granted under the plan. Under the Virgin Media Sharesave Plan, options to purchase up
to 10.0 million shares of our common stock may be granted to certain of our employees. Accordingly, we have 10.0
million shares of common stock reserved for issuance under the Virgin Media Sharesave Plan.
Valuation Basis
The following bases were applied in setting the assumptions used to measure the fair value of our stock based
compensation plans.
Risk-free interest rates. This is the range of domestic risk free rates representing the principle markets in which our
stock and the stocks of the comparator group organizations trade. For option grants this is the U.S. Treasury Strip rate
Table of Contents
VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 8—Derivative Financial Instruments and Hedging Activities (continued)