Vesuvius plc Prospectus

ate swaps designated as cash flow hedges. When the transaction that was being hedged is realised and
affects profit or loss, the cumulative gain or loss on the derivative is removed from invested capital and
recognised in the income statement in the same period.
Fair value hedges
The change in fair value of a derivative that is designated as a fair value hedge is recognised within trading
profit in the income statement. The carrying amount of the hedged item is adjusted by the change in its fair
value that is attributable to the hedged risk and this adjustment is recognised within trading profit in the
income statement.
Net investment hedges
The effective part of any gain or loss on a derivative that is designated as a hedge of a net investment in a
foreign operation is recognised in other comprehensive income and presented in changes in invested
capital and is subsequently recognised in the income statement as part of the profit or loss on disposal of
the net investment. The ineffective portion of the gain or loss is recognised immediately within trading
profit in the income statement.
21.1 Analysis of derivative financial instruments
31 December 2009 31 December 2010
Assets Liabilities Assets Liabilities
(£m)
Cash flow hedges .................................... — (0.1) — (2.0)
Fair value hedges .................................... — (1.8) — —
Net investment hedges ................................
Other derivatives – not designated for hedge accounting
— (17.3) — (26.1)
purpose .......................................... — — — (2.7)
Total derivative financial instruments .................. — (19.2) — (30.8)
31 December 2011
Assets Liabilities
(£m)
Cash flow hedges ................................................... 0.4 (0.9)
Net investment hedges ............................................... — (15.6)
Other derivatives – not designated for hedge accounting purposes ............. 0.8 (1.4)
Total derivative financial instruments ................................. 1.2 (17.9)
All of the fair values shown in the table above have been calculated using quoted prices from active
markets. Cash flows in respect of the cash flow hedges shown in the table above will all occur in
2012. All of the £17.9 million of derivative liabilities reported in the table above as at 31 December
2011 will mature within a year of the balance sheet date. The comparative data for FY 2009 and FY
2010 shown in the table above has been re-classified from an analysis based upon the type of
financial instrument, as it was presented in the Cookson Group 2010 annual report, to one based
upon the type of hedge, which better represents Vesuvius’ financial risk management policy.
(a) Cash flow hedges
Cash flow hedges in the table above include: floating to fixed interest rate swaps that are
used to manage the interest rate profile of Vesuvius’ borrowings (note 24.2); forward
foreign currency contracts used to hedge the currency risk in forecast sales or purchases;
and forward metal purchase contracts used to hedge the cash flow risk relating to future
sales arising from fluctuation in commodity metals prices.
(b) Fair value hedges
Fair value hedges in the table above comprise forward foreign currency contracts used to
hedge the currency risk in payables and receivables and forward sales contracts used to
hedge the fair value risk relating to the balance sheet value of inventory arising from
fluctuation in commodity metals prices.
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