Virgin Media 2006 Annual Report Download - page 156

VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Significant Accounting Policies (Continued)
instrument is deferred in other comprehensive income. Amounts recorded in other comprehensive income are reclassified to the
statement of operations to match the corresponding cash flows on the underlying hedged transaction. Changes in fair value of any
instrument not designated as a hedge or considered to be ineffective as a hedge are reported in earnings immediately.
Where a hedge no longer meets the effectiveness criteria, any gains or losses deferred in equity are only transferred to the
statement of operations when the committed or forecasted transaction is recognized in the statement of operations. However, where we
have applied cash flow hedge accounting for a forecasted or committed transaction that is no longer expected to occur, then the
cumulative gain or loss that has been recorded in equity is recognized immediately as gains or losses on derivative instruments in the
statement of operations. When a hedging instrument expires or is sold, any cumulative gain or loss existing in equity at that time
remains in equity and is recognized when the forecast transaction is ultimately recognized in the statement of operations.
Software Development Costs
We capitalize costs related to computer software developed or obtained for internal use in accordance with SOP 98−1,
Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. Software obtained for internal use has
generally been enterprise−level business and finance software that we customize to meet our specific operational needs. Costs incurred
in the application development phase are capitalized and amortized over their useful lives, which are generally three to five years. We
have not sold, leased or licensed software developed for internal use to our customers and we have no intention of doing so in the
future.
Income Taxes
We provide for income taxes in accordance with FASB Statement No. 109, Accounting for Income Taxes. Judgment is required
in determining our provision for income taxes, deferred tax assets and liabilities and the extent to which deferred tax assets can be
recognized. We recognize deferred tax assets only if it is more likely than not that sufficient taxable income will be available in the
future against which the temporary differences and unused tax losses can be utilized. We have considered future taxable income and
tax planning strategies in assessing whether deferred tax assets should be recognized.
3. Recent Accounting Pronouncements
In July 2006, the FASB issued FASB Interpretation (“FIN”) No. 48, Accounting for Uncertainty in Income Taxes—an
interpretation of FASB Statement 109. FIN 48 prescribes a comprehensive model for recognizing, measuring, presenting and
disclosing in the financial statements tax positions taken or expected to be taken on a tax return, including a decision whether to file or
not to file in a particular jurisdiction. FIN 48 is effective for fiscal years beginning after December 15, 2006. If there are changes in
net assets as a result of application of FIN 48 these will be accounted for as an adjustment to retained earnings. We adopted FIN 48
effective January 1, 2007. We are continuing to evaluate the impact of adopting FIN 48, but do not anticipate any significant impact
on our financial statements.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS 157 provides guidance for using fair value
to measure assets and liabilities. It also responds to investors’ requests for
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Source: VIRGIN MEDIA INVESTM, 10−K, March 01, 2007