Vesuvius plc Prospectus

• to have available the necessary financial resources to allow Vesuvius to invest in areas that may deliver
acceptable future returns to investors; and
• to maintain sufficient financial resources to mitigate against risks and unforeseen events.
Vesuvius operated comfortably within the requirements of its debt covenants throughout the year and has
substantial liquidity headroom within its committed debt facilities. Details of Vesuvius’ covenant
compliance and committed debt facilities can be found in Part VIII: “Operating and Financial Review” of
this document.
24 Financial risk management
24.1 Accounting policy
(a) Non-derivative financial instruments
Loans and borrowings are initially recognised at fair value plus directly attributable
transaction costs. After initial recognition they are measured at amortised cost, using the
effective interest method.
(b) Foreign currencies
The individual financial statements of each Vesuvius entity are prepared in their functional
currency, which is the currency of the primary economic environment in which that entity
operates. For the purpose of the consolidated financial statements, the results and financial
position of each entity are translated into pounds sterling, which is the presentational
currency of Vesuvius plc.
Reporting foreign currency transactions in functional currency
Transactions in currencies other than the entity’s functional currency (foreign currencies)
are initially recorded at the rates of exchange prevailing on the dates of the transactions. At
each subsequent balance sheet date:
(i) foreign currency monetary items are re-translated at the rates prevailing at the
balance sheet date. Exchange differences arising on the settlement or re-translation
of monetary items are recognised in the income statement; and
(ii) non-monetary items measured at historical cost in a foreign currency are not
re-translated.
Translation from functional currency to presentational currency
When the functional currency of a Vesuvius entity is different from Vesuvius’
presentational currency (pounds sterling), its results and financial position are translated
into the presentational currency as follows:
(i) assets and liabilities are translated using exchange rates prevailing at the balance
sheet date;
(ii) income and expense items are translated at average exchange rates for the year,
except where the use of such average rates does not approximate the exchange rate
at the date of a specific transaction, in which case the transaction rate is used; and
(iii) all resulting exchange differences are recognised in other comprehensive income
and presented within changes in invested capital and are re-classified to profit or
loss in the period in which the foreign operation is disposed.
Net investment in foreign operations
Exchange differences arising on a monetary item that forms part of a reporting entity’s net
investment in a foreign operation are initially recognised in other comprehensive income
and presented within changes in invested capital and re-classified to profit or loss on
disposal of the net investment.
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