Virgin Media 2013 Annual Report Download - page 120

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III - 10
______________
(a) The loss during 2013 is primarily attributable to the net effect of (i) losses associated with an increase in the value of the
pound sterling relative to the U.S. dollar and (ii) gains associated with increases in market interest rates in the pound sterling
market. In addition, the loss during 2013 includes a net gain of £30.4 million resulting from changes in our credit risk
valuation adjustments. The loss during 2012 is primarily attributable to (i) losses associated with decreases in market
interest rates in the pound sterling market and (ii) losses associated with an increase in the value of the pound sterling
relative to the U.S. dollar. In addition, the loss during 2012 includes a net gain of £6.3 million resulting from changes in
our credit risk valuation adjustments.
(b) These amounts primarily represent activity related to the Virgin Media Capped Calls and, in the Successor period, the
derivative embedded in the VM Convertible Notes. The fair values of our equity-related derivative instruments are primarily
impacted by the trading prices of the underlying security.
For additional information concerning our derivative instruments, see notes 4 and 5 to our consolidated financial statements.
Foreign currency transaction gains (losses), net
Our foreign currency transaction gains or losses primarily result from the remeasurement of monetary assets and liabilities
that are denominated in currencies other than the underlying functional currency of the applicable entity. Unrealized foreign
currency transaction gains or losses are computed based on period-end exchange rates and are non-cash in nature until such time
as the amounts are settled. The details of our foreign currency transaction gains (losses), net, are as follows:
Year ended December 31,
2013 2012
in millions
U.S. dollar denominated debt issued by our company......................................................................... £ 155.4 £ (0.1)
Related-party payables and receivables denominated in a currency other than the entity’s
functional currency (a)...................................................................................................................... (38.5) —
Cash and restricted cash denominated in a currency other than the entity’s functional currency........ 21.5 (7.7)
Other..................................................................................................................................................... 2.1 1.5
Total................................................................................................................................................. £ 140.5 £ (6.3)
______________
(a) Amount primarily relates to our U.S. dollar-denominated notes receivable from Lynx Europe 2. Accordingly, this amount
is a function of movements of the U.S. dollar against the pound sterling. During the fourth quarter of 2013, the U.S. dollar-
denominated notes receivable from Lynx Europe 2 were redenominated to pound sterling and as a result, we no longer
record foreign currency transaction gains (losses) related to these notes.
Other income, net
Our other income, net, decreased £6.0 million during 2013, as compared to 2012, due primarily to the reversal of a £5.5 million
provision during the second quarter of 2012 that was originally recorded in connection with a contingency associated with certain
of our legacy debt.
Income tax benefit (expense)
We recognized income tax expense of £215.6 million and income tax benefit of £2,652.0 million during 2013 and 2012,
respectively.
The income tax expense during 2013 differs from the expected income tax benefit of £60.4 million (based on the U.S. federal
income tax rate of 35%) due primarily to the negative impacts of (i) a reduction in net deferred tax assets in the U.K. due to enacted
changes in tax law, (ii) a net increase in valuation allowances and (iii) certain permanent differences between the financial and tax
accounting treatment of items associated with investments in subsidiaries. The negative impact of these items was partially offset