ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. At January 1, 2001 the Company adopted SFAS 133 "Accounting for Derivative Instruments and Hedging Activities" as amended by SFAS 137 and 138. SFAS 133 established accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. It requires the recognition at fair value of all derivative instruments as assets or liabilities in the Company's balance sheet. The accounting treatment of changes in fair value is dependent upon whether or not a derivative instrument is designated a hedge and if so, the type of hedge and its effectiveness as a hedge. For derivatives, which are not designated as hedges, changes in fair value are recorded immediately in earnings. For derivatives designated as cash flow hedges, changes in fair value on the effective portion of a hedge xxx xxcorded within other comprehensive income ("OCI") until the hedged transaction occurs and are then recorded within earnings. Changes in the ineffective portion of a hedge are recorded immediately in earnings. For derivatives designated as fair value hedges, changes in fair value are recorded immediately in earnings. Xx xid not, however, have any fair value hedges during the three-month periods ended March 31, 2002 and 2000. We discontinue hedge accounting for derivative financial instruments when it is determined that the derivative instrument is no longer effective in offsetting changes in the cash flows of the hedged item; the derivative instrument expires or is sold; the derivative instrument is no longer designated as a hedging instrument, because it is unlikely that a forecasted transaction will occur; a hedged firm commitment no longer meets the definition of a firm commitment; or our management determines that designation of the derivative instrument as a hedging instrument is no longer appropriate. In 2002, we had the ability to terminate in-the-money derivative contracts that fluctuate in value. In March 2002, we terminated certain of these derivative contracts netting (pound)74 million to us, and in May 2002 we realized an additional (pound)30 million. During the three-month period ended March 31, 2002, the Company recorded a (pound)46 million decline in fair value to cumulative OCI, consisting of a gain of (pound)4 million to short term derivative liabilities and a (pound)50 million decline to long term derivative assets. In the three-month period ended March 31, 2001, the Company recorded a (pound)31 million gain in fair value to cumulative OCI, consisting of a decline of (pound)12 million to short term derivative liabilities and a (pound)43 million gain to long term derivative assets. The Company hedges some of its interest rate risk and some of its foreign currxxxx xisk on its Senior Secured facility and US dollar-denominated debt instruments through the use of interest rate swaps, forward foreign exchange contracts and foreign currency swaps. The purpose of the derivative instruments is to provide a measure of stability over the Company's exposure to movements in interest rates and the sterling/ US dollar exchange rate. The majority of the Company's derivative instruments are designated as cash flow hedges. -------------------------------------------------------------------------------- TELEWEST COMMUNICATIONS PLC US GAAP UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -------------------------------------------------------------------------------- NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Appears in 1 contract
Samples: Telewest Communications PLC /New/
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. At January 1, 2001 the Company adopted SFAS 133 "Accounting for Derivative Instruments and Hedging Activities" , as amended by SFAS 137 and 138. SFAS 133 established accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. It requires the recognition at fair value of all derivative instruments as assets or liabilities in the Company's balance sheet. The accounting treatment of changes in fair value is dependent upon whether or not a derivative instrument is designated a hedge and if so, the type of hedge and its effectiveness as a hedge. For derivatives, which are not designated as hedges, changes in fair value are recorded immediately in earnings. For derivatives designated as cash flow hedges, changes in fair value on the effective portion of a hedge xxx xxcorded arx xxxxrded within other comprehensive income Other Comprehensive Income ("`OCI"') until the hedged transaction occurs and are then recorded within earnings. Changes in the ineffective portion of a hedge are recorded immediately in earnings. For derivatives designated as fair value hedges, changes in fair value are recorded immediately in earnings. Xx xid xxxe not, however, have had any fair value hedges during since the three-month periods ended March 31, 2002 and 2000adoption of SFAS 133. We discontinue hedge accounting hedgx xxxxunting for derivative financial instruments when it is determined that the derivative instrument is no longer effective in offsetting changes in the cash flows of the hedged item; the derivative instrument expires or is sold; the derivative instrument is no longer designated as a hedging instrument, because it is unlikely that a forecasted transaction will occur; a hedged firm commitment no longer meets the definition of a firm commitment; or our management determines that designation of the derivative instrument as a hedging instrument is no longer appropriate. In 2002, we had the ability to terminate in-the-money derivative contracts that fluctuate in value. In March 2002, we terminated certain of these derivative contracts netting (pound)74 million to us, and in May 2002 we realized an additional (pound)30 million. During the three-month period ended March 31, 2002, the Company recorded a (pound)46 million decline in fair value to cumulative OCI, consisting of a gain of (pound)4 million to short term derivative liabilities and a (pound)50 million decline to long term derivative assets. In the three-month period ended March 31, 2001, the Company recorded a (pound)31 million gain in fair value to cumulative OCI, consisting of a decline of (pound)12 million to short term derivative liabilities and a (pound)43 million gain to long term derivative assets. -------------------------------------------------------------------------------- TELEWEST COMMUNICATIONS PLC US GAAP UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -------------------------------------------------------------------------------- NOTES TO THE UNAUDITED CONDENDSED CONSOLIDATED FINANCIAL STATEMENTS The Company hedges some of its interest rate risk and some of its foreign currxxxx xisk on its Senior Secured facility and US dollar-denominated debt instruments through xxxxxgh the use of interest rate swaps, . The Company also historically hedged some of its foreign currency risk through the use of forward foreign exchange contracts and foreign currency swaps. The Company, in response to fluctuations in the sterling/ US dollar exchange rate, terminated its interest rate hedging arrangements. The purpose of the derivative instruments is to provide a measure of stability over the Company's exposure to movements in interest rates and the sterling/ US dollar exchange rate. The majority of the Company's derivative instruments are designated as cash flow hedges. -------------------------------------------------------------------------------- TELEWEST COMMUNICATIONS PLC US GAAP UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -------------------------------------------------------------------------------- NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
Appears in 1 contract
Samples: Telewest Communications PLC /New/
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. At January 1, 2001 the Company adopted SFAS 133 "Accounting for Derivative Instruments and Hedging Activities" , as amended by SFAS 137 and 138. SFAS 133 established accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. It requires the recognition at fair value of all derivative instruments as assets or liabilities in the Company's balance sheet. The accounting treatment of changes in fair value is dependent upon whether or not a derivative instrument is designated a hedge and if so, the type of hedge and its effectiveness as a hedge. For derivatives, which are not designated as hedges, changes in fair value are recorded immediately in earnings. For derivatives designated as cash flow hedges, changes in fair value on the effective portion of a hedge xxx xxcorded arx xxxxrded within other comprehensive income Other Comprehensive Income ("`OCI"') until the hedged transaction occurs and are then recorded within earnings. Changes in the ineffective portion of a hedge are recorded immediately in earnings. For derivatives designated as fair value hedges, changes in fair value are recorded immediately in earnings. Xx xid xxxe not, however, have had any fair value hedges during since the three-month periods ended March 31, 2002 and 2000adoption of SFAS 133. We discontinue hedge accounting hedgx xxxxunting for derivative financial instruments when it is determined that the derivative instrument is no longer effective in offsetting changes in the cash flows of the hedged item; the derivative instrument expires or is sold; the derivative instrument is no longer designated as a hedging instrument, because it is unlikely that a forecasted transaction will occur; a hedged firm commitment no longer meets the definition of a firm commitment; or our management determines that designation of the derivative instrument as a hedging instrument is no longer appropriate. In 2002, we had the ability to terminate in-the-money derivative contracts that fluctuate in value. In March 2002, we terminated certain of these derivative contracts netting (pound)74 million to us, and in May 2002 we realized an additional (pound)30 million. During the three-month period ended March 31, 2002, the Company recorded a (pound)46 million decline in fair value to cumulative OCI, consisting of a gain of (pound)4 million to short term derivative liabilities and a (pound)50 million decline to long term derivative assets. In the three-month period ended March 31, 2001, the Company recorded a (pound)31 million gain in fair value to cumulative OCI, consisting of a decline of (pound)12 million to short term derivative liabilities and a (pound)43 million gain to long term derivative assets. The Company hedges some of its interest rate risk and some of its foreign currxxxx xisk on its Senior Secured facility and US dollar-denominated debt instruments through Facility xxxxxgh the use of interest rate swaps, . The Company also historically hedged some of its foreign currency risk through the use of forward foreign exchange contracts and foreign currency swaps. The Company, in response to fluctuations in the sterling/ US dollar exchange rate, terminated its interest rate hedging arrangements. The purpose of the derivative instruments is to provide a measure of stability over the Company's exposure to movements in interest rates and the sterling/ US dollar exchange rate. The majority of the Company's derivative instruments are designated as cash flow hedges. -------------------------------------------------------------------------------- TELEWEST COMMUNICATIONS PLC US GAAP UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -------------------------------------------------------------------------------- NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Appears in 1 contract
Samples: Telewest Communications PLC /New/
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. At January 1, 2001 the Company adopted SFAS 133 "Accounting for Derivative Instruments and Hedging Activities" as amended by SFAS 137 and 138. SFAS 133 established accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. It requires the recognition at fair value of all derivative instruments as assets or liabilities in the Company's balance sheet. The accounting treatment of changes in fair value is dependent upon whether or not a derivative instrument is designated a hedge and if so, the type of hedge and its effectiveness as a hedge. For derivatives, which are not designated as hedgesxxxxxx, changes in fair value are recorded immediately in earnings. For derivatives designated as cash flow hedgesxxxxxx, changes in fair value on the effective portion of a hedge xxx xxcorded are recorded within other comprehensive income ("OCI") until the hedged transaction occurs and are then recorded within earnings. Changes in the ineffective portion of a hedge are recorded immediately in earnings. For derivatives designated as fair value hedgesxxxxxx, changes in fair value are recorded immediately in earnings. Xx xid We did not, however, have any fair value hedges xxxxxx during the three-month and nine-month periods ended March 31September 30, 2002 and 20002002. We discontinue hedge accounting for derivative financial instruments when it is determined that the derivative instrument is no longer effective in offsetting changes in the cash flows of the hedged item; the derivative instrument expires or is sold; the derivative instrument is no longer designated as a hedging instrument, because it is unlikely that a forecasted transaction will occur; a hedged firm commitment no longer meets the definition of a firm commitment; or our management determines that designation of the derivative instrument as a hedging instrument is no longer appropriate. The tests for determining the effectiveness of a cash flow hedge compare on a strict basis the amount and timing of the underlying economic exposure with the cash flows of the derivative instrument. We may continue to use derivative instruments to protect our exposure to interest and currency fluctuations but be unable to meet the tests of effectiveness set out under SFAS 133. In the three-month period ended March 31, 2002, we determined that it was probable that forecasted future prepayments of principal against outstanding US dollar-denominated debt would not occur. Accordingly, the cumulative adjustment in OCI of (pound)53 million resulting from marking to market the derivative instruments has been reclassified from OCI to foreign exchange gains in the Statement of Operations. Subsequent adjustments of the carrying value of these instruments to fair value are taken directly to the Statement of Operations as incurred. In the nine-month period ended September 30, 2002, we had the ability to terminate in-the-money derivative contracts that fluctuate in value. Such derivative contracts hedged our exposure to fluctuations in the US dollar/pound sterling exchange rates on our US dollar-denominated debt. In March 2002, we terminated certain of these derivative contracts with a nominal value of $950 million ((pound)655 million), netting (pound)74 million cash inflow to us, and in . In May 2002 we realized terminated further derivative contracts with a nominal value of $367 million ((pound)253 million) realizing an additional (pound)30 million. During the three-month period ended March 31, 2002, the Company recorded a (pound)46 million decline in fair value to cumulative OCI, consisting of a gain of (pound)4 million to short term derivative liabilities and a (pound)50 million decline to long term derivative assetscash inflow. In the three-month period ended March 31September 30, 2002, we terminated arrangements with a nominal value of $2.3 billion (approximately (pound)1.5 billion). Contracts with a nominal value of $1 billion were settled in cash resulting in an outflow of (pound)28 million. The remaining contracts with a nominal value of $1.3 billion have yet to be settled for a total cost of (pound)33 million of which (pound)19 million was due on October 1, 2002, but the Company deferred such payment and is considering the payment in the context of its financial restructuring. In addition, in June 2002, we reviewed the effectiveness as xxxxxx of the derivative instruments hedging our exposure to fluctuations in interest rates on our long-term bank debt. Our review concluded that continued designation of these instruments as xxxxxx was no longer appropriate and hedge accounting was discontinued with immediate effect. The dedesignation of these instruments as xxxxxx resulted in a transfer of (pound)7 million from cumulative OCI to interest expense within the Statement of Operations. During the nine-month period ended September 30, 2002, we recorded a net (pound)51 million transfer from cumulative OCI to the Statement of Operations arising from the termination of derivative contracts as ineffective xxxxxx, as described above. In the nine-month period ended September 30, 2001, the Company we recorded a (pound)31 pound)41 million gain in fair value to cumulative OCI, consisting of a decline loss of (pound)12 pound)9 million to short short-term derivative liabilities and a (pound)43 pound)50 million gain to long long- term derivative assets. -------------------------------------------------------------------------------- TELEWEST COMMUNICATIONS PLC US GAAP UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -------------------------------------------------------------------------------- NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The Company hedges continues to hedge some of its interest rate risk and some of its foreign currxxxx xisk on its Senior Secured facility and US dollar-denominated debt instruments Facility through the use of interest rate swaps, forward foreign exchange contracts and foreign currency swaps. The purpose of the derivative instruments is to provide a measure of stability over the Company's exposure to movements in sterling interest rates and the sterling/ US dollar exchange rate. The majority of the Company's derivative instruments are designated as cash flow hedges. -------------------------------------------------------------------------------- TELEWEST COMMUNICATIONS PLC US GAAP UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -------------------------------------------------------------------------------- NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSon its sterling denominated bank debt.
Appears in 1 contract
Samples: Telewest Communications PLC /New/
