Virgin Media 2006 Annual Report Download - page 123

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
16. Income Taxes (Continued)
The reconciliation of income taxes computed at U.S. federal statutory rates to income tax (benefit) expense is as follows (in
millions):
Year Ended December 31,
2006 2005 2004
(Benefit) at federal statutory rate (35%) £ (182.7) £ (77.7) £ (176.5)
Add:
Non−deductible expenses 31.1 39.1 64.4
Foreign losses with no benefit 92.6 69.9 91.3
U.S. losses with no benefit 30.5 — —
Difference between U.S. and foreign tax rates 16.7 12.5 24.5
State and local income tax — (1.3) 1.3
Reduction in valuation allowance for U.S. deferred tax
assets — (25.1) —
Other — 1.4 —
(Benefit) provision for income taxes £ (11.8) £ 18.8 £ 5.0
At each period end, it is necessary for us to make certain estimates and assumptions to compute the provision for income taxes
including, but not limited to the expected operating income (or loss) for the year, projections of the proportion of income (or loss)
earned and taxed in the United Kingdom and the extent to which this income (or loss) may also be taxed in the United States,
permanent and temporary differences, the likelihood of deferred tax assets being recovered and the outcome of contingent tax risks. In
the normal course of business, our tax returns are subject to examination by various taxing authorities. Such examinations may result
in future tax and interest assessments by these taxing authorities for uncertain tax positions taken in respect to matters such as business
acquisitions and disposals and certain financing transactions including intercompany transactions, amongst others. We accrue a
liability when we believe an assessment may be probable and the amount is estimable. In accordance with generally accepted
accounting principles, the impact of revisions to these estimates is recorded as income tax expense or benefit in the period in which
they become known. Accordingly, the accounting estimates used to compute the provision for income taxes have and will change as
new events occur, as more experience is acquired, as additional information is obtained and our tax environment changes.
17. Related Party Transactions
We have identified the following persons as being related parties to us, with whom we have entered into transactions as described
below:
• Virgin Enterprises Limited became a holder of our common stock as a result of our acquisition of Virgin Mobile on July 4,
2006. As of December 31, 2006, Virgin Enterprises Limited owned 10.5% of our common stock (based on SEC filings). In
addition, Gordon McCallum is a member of our board of directors and is the Group Strategy Director at Virgin Enterprises
Limited;
• Franklin Mutual Advisers, LLC is one of the principal stockholders and owned 7.0% of our common stock as of December 31,
2006 (based on SEC filings); and
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Source: VIRGIN MEDIA INVESTM, 10−K, March 01, 2007