Virgin Media 2006 Annual Report Download - page 91

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Significant Accounting Policies (Continued)
Fixed Assets
Depreciation is computed by the straight−line method over the estimated useful lives of the assets. Land and fixed assets held for
sale are not depreciated. Estimated useful lives are as follows:
Operating equipment:
Cable distribution plant 8−30 years
Switches and headends 8−10 years
Customer premises equipment 5−10 years
Other operating equipment 8−20 years
Other equipment:
Buildings 30 years
Leasehold improvements 20 years or, if less, the lease term
Computer infrastructure 3−5 years
Other equipment 5−12 years
The cost of fixed assets includes amounts capitalized for labor and overhead expended in connection with the design and
installation of our operating network equipment and facilities. Costs associated with initial customer installations, additions of network
equipment necessary to enable enhanced services, acquisition of additional fixed assets and replacement of existing fixed assets are
capitalized. The costs of 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
F−11
Source: VIRGIN MEDIA INVESTM, 10−K, March 01, 2007