Virgin Media 2012 Annual Report Download - page 164

F-93
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The types of inputs used to measure fair value are
classified into the following hierarchy:
Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2 Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices
for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted
prices that are observable for the asset or liability
Level 3 Unobservable inputs for the asset or liability
We endeavor to utilize the best available information in measuring fair value. Financial assets and liabilities are classified
in their entirety based on the lowest level of input that is significant to the fair value measurement.
In estimating the fair value of our financial assets and liabilities, we used the following methods and assumptions:
Derivative financial instruments:
As a result of our financing activities, we are exposed to market risks from changes in interest and foreign currency
exchange rates, which may adversely affect our operating results and financial position. When deemed appropriate,
we minimize our risks from interest and foreign currency exchange rate fluctuations through the use of derivative
financial instruments such as foreign currency forward rate contracts, interest rate swaps and cross-currency interest
rate swaps. These contracts are valued using internal models based on observable inputs, counterparty valuations,
or market transactions in either the listed or over-the-counter markets, adjusted for non-performance risk. As such,
these derivative instruments are classified within level 2 in the fair value hierarchy.
The fair values of our derivative financial instruments are disclosed in note 7.
Long term debt:
The carrying value of our senior credit facility approximates its fair value and is excluded from the table on the following
page. The fair values of the senior notes and senior secured notes in the following table are based on the market
prices in active markets which incorporate non-performance risk. As such, these measurements are classified within
level 1 in the fair value hierarchy.
The carrying values of the $500 million 5.25% and £650 million 5.50% senior secured notes due 2021 include increases
of £42.9 million and £109.1 million, respectively, at December 31, 2012, and increases of £45.7 million and £77.9
million, respectively, at December 31, 2011, as a result of our application of fair value hedge accounting to these
instruments.
Table of Contents
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES
VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARES
COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 6—Fair Value Measurements