Virgin Media 2006 Annual Report Download - page 149

VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Significant Accounting Policies (Continued)
methodologies may have a material effect on the estimated fair value amounts. We have based these fair value estimates on pertinent
information available to us as of December 31, 2006 and 2005.
Principles of Consolidation
The consolidated financial statements include the accounts for us and our wholly−owned subsidiaries. Intercompany accounts
and transactions have been eliminated on consolidation. Our consolidated financial statements also include the accounts of variable
interest entities (“VIEs”), which are entities that among other things, lack sufficient equity to finance their activities without additional
support from other parties. All significant intercompany accounts and transactions have been eliminated. The operating results of
acquired companies are included in our consolidated statement of operations from the date of acquisition.
For investments in which we own 20% to 50% of the voting shares and have significant influence over the operating and
financial policies, the equity method of accounting is used. Accordingly, our share of the earnings and losses of these companies are
included in the share of income (losses) in equity investments in the accompanying consolidated statements of operations. For
investments in which we own less than 20% of the voting shares and do not have significant influence, the cost method of accounting
is used. Under the cost method of accounting, we do not record our share in the earnings and losses of the companies in which we
have an investment.
Reclassification
Certain prior year amounts have been reclassified to conform to the current year presentation.
Foreign Currency Translation
Our functional currency is the pound sterling. Our reporting currency is the pound sterling. Foreign currency transaction gains
and losses are recorded in the statement of operations.
Cash Equivalents and Restricted Cash
Cash equivalents are short−term highly liquid investments purchased with a maturity of three months or less. We had no cash
equivalents at December 31, 2006 and 2005.
Restricted cash balances of £5.2 million and £2.6 million as at December 31, 2006 and 2005, respectively, represent cash
balances collateralized against performance bonds given on our behalf.
Trade Receivables
Our trade receivables are stated at outstanding principal balance, net of allowance for doubtful accounts. Allowances for doubtful
accounts are estimated based on the current aging of trade receivables, prior collection experience and future expectations of
conditions that might impact recoverability. The allowance for doubtful accounts is £49.4 million at December 31, 2006 and
£39.8 million at December 31, 2005.
F−70
Source: VIRGIN MEDIA INVESTM, 10−K, March 01, 2007