Virgin Media 2012 Annual Report Download - page 171

F-100
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 gain (loss) on derivatives in net income in
the statement of changes in equity 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 8—Employee Benefit Plans
Defined Benefit Plans
Certain of our subsidiaries operate two defined benefit pension plans in the U.K. The assets of the plans are held
separately from those of ourselves and are invested in portfolios under the management of investment groups. The
pension cost is calculated using the projected unit method. Our defined benefit pension plans use a measurement
date of December 31. Our funding requirements are reviewed and generally revised based on a valuation that is
performed every three years. The current triennial funding valuation is being performed as of December 31, 2011 and
we expect our funding requirements arising from this valuation to be determined prior to March 31, 2013. Our policy
is to fund amounts to the defined benefit plans necessary to comply with the funding requirements as prescribed by
the laws and regulations in the U.K.
Employer Contributions
For the year ended December 31, 2012, we contributed £17.7 million to our pension plans. We presently anticipate
contributing a total of £17.0 million to fund our pension plans in 2013, but this is subject to the outcome of the on-going
triennial valuation.
Obligations and Funded Status
The change in projected benefit obligation was as follows (in millions):
Year ended December 31,
2012 2011
Benefit obligation at beginning of year £ 424.6 £ 390.0
Service cost 1.8 1.7
Interest cost 20.1 21.1
Members’ contributions 0.3 0.3
Plan amendments — (3.1)
Actuarial (gain) loss (0.6) 27.4
Benefits paid (15.1) (12.8)
Benefit obligation at end of year £ 431.1 £ 424.6
Table of Contents
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES
VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES
COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 7—Derivative Financial Instruments and Hedging Activities (continued)