Virgin Media 2006 Annual Report Download - page 151

VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Significant Accounting Policies (Continued)
reconnecting the same service to a previously installed premise are charged to expense in the period incurred. Costs for repairs and
maintenance are charged to expense as incurred.
Labor and overhead costs directly related to the construction and installation of fixed assets, including payroll and related costs of
some employees and related rent and other occupancy costs, are capitalized. The payroll and related costs of some employees that are
directly related to construction and installation activities are capitalized based on specific time devoted to these activities where
identifiable. In cases where the time devoted to these activities is not specifically identifiable, we capitalize costs based upon
estimated allocations.
Goodwill and Intangible Assets
Goodwill and other intangible assets with indefinite lives, such as television channel tradenames and reorganization value in
excess of amount allocable to identifiable assets, are not amortized and are tested for impairment annually or more frequently if
circumstances indicate a possible impairment exists in accordance with Financial Accounting Standards Board (“FASB”) Statement
No. 142, Goodwill and Other Intangible Assets (FAS 142).
Goodwill and other intangible assets with indefinite lives are allocated to various reporting units, which are the operating
segments. For purposes of performing the impairment test of goodwill, we established the following reporting units: cable, mobile,
Virgin Media TV and sit−up. We compare the fair value of the reporting unit to its carrying amount on an annual basis to determine if
there is potential goodwill impairment. If the fair value of the reporting unit is less than its carrying value, an impairment loss is
recorded to the extent that the fair value of the goodwill and other intangible assets with indefinite lives within the reporting unit is
less than its carrying value. We evaluate our cable reporting unit for impairment on an annual basis as at December 31, while all other
reporting units are evaluated as at June 30. We concluded that we do not have an impairment loss related to these assets. In the future,
we may incur impairment charges under SFAS No. 142 if market values decline and we do not achieve expected cash flow growth
rates.
Intangible assets include trademark license agreements and customer lists. Trademark license agreements represent the portion of
purchase price allocated to agreements to license trademarks acquired in business combinations. Trademark licenses are amortized
over the period in which we expect to derive benefits, which is principally five years. Customer lists represent the portion of the
purchase price allocated to the value of the customer base. Customer lists are amortized on a straight−line basis over the period in
which we expect to derive benefits, which is principally three to five years.
Asset Retirement Obligations
We accrue for the liability in respect of dilapidation on our leasehold properties over the term of the lease in accordance with
FASB Statement No. 13, Accounting for Leases (FAS 13).
In June 2005, the Financial Accounting Standards Board (“FASB”) issued FSP FAS 143−1, Accounting for Electronic
Equipment Waste Obligations (FSP 143−1). The FASB issued the FSP to address the accounting for certain obligations associated
with the Waste Electrical and Electronic Equipment Directive adopted by the European Union (EU). FSP 143−1 requires that the
commercial user should
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Source: VIRGIN MEDIA INVESTM, 10−K, March 01, 2007