Virgin Media 2006 Annual Report Download - page 152

VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Significant Accounting Policies (Continued)
apply the provisions of FASB Statement No. 143 and the related FASB Interpretation No. 47 to certain obligations associated with
historical waste (as defined by the Directive), since this type of obligation is an asset retirement obligation. The FSP is effective for
the later of the first reporting period ending after June 8, 2005 or the Directive’s adoption into law by the applicable EU−member
country. The Directive was adopted on December 12, 2006, and is effective January 2, 2007. Management have reviewed their
obligations under the law and concluded that an obligation exists for certain of the company’s customer premises equipment. As a
result, we have recognized a retirement obligation of £54.1 million and fixed assets of £23.7 million on the balance sheet and a
cumulative effect change in accounting principle £32.8 million in the statement of operations.
Impairment of Long−Lived Assets
In accordance with FASB Statement No. 144, Impairment of Long−Lived Assets (FAS 144), long−lived assets, including fixed
assets and amortizable definite lived intangible assets, are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. We assess the recoverability of the carrying value of long−lived assets, by
first grouping our long−lived assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely
independent of the cash flows of other assets and liabilities (the asset group) and, secondly, estimating the undiscounted future cash
flows that are directly associated with and expected to arise from the use of and eventual disposition of such asset group. We estimate
the undiscounted cash flows over the remaining useful life of the primary asset within the asset group. If the carrying value of the asset
group exceeds the estimated undiscounted cash flows, we record an impairment charge to the extent the carrying value of the
long−lived asset exceeds its fair value. We determine fair value through quoted market prices in active markets or, if quoted market
prices are unavailable, through the performance of internal analysis of discounted cash flows or external appraisals. The undiscounted
and discounted cash flow analyses are based on a number of estimates and assumptions, including the expected period over which the
asset will be utilized, projected future operating results of the asset group, discount rate and long term growth rate.
As of December 31, 2006, we reviewed our long−lived assets for impairment and determined that there was no impairment of our
long−lived assets.
Deferred Financing Costs
Deferred financing costs of £99.7 million and £57.1 million as of December 31, 2006 and 2005, respectively, are included in
other assets. Deferred financing costs are incurred in connection with the issuance of debt and are amortized over the term of the
related debt using the effective interest method.
Restructuring Costs
As of January 1, 2003, we adopted FASB Statement No. 146. Accounting for Costs Associated with Exit or Disposal Activities
(FAS 146) and recognize a liability for costs associated with restructuring activities when the liability is incurred. Prior to 2003, we
recognized a liability for costs associated with restructuring activities at the time a commitment to restructure is given in accordance
with EITF 94−3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a restructuring). Liabilities for costs associated with restructuring activities initiated prior to January 1,
2003 continue to be accounted for under EITF 94−3.
F−73
Source: VIRGIN MEDIA INVESTM, 10−K, March 01, 2007