Virgin Media 2006 Annual Report Download - page 92

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Significant Accounting Policies (Continued)
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 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 £58.2 million and fixed assets of £24.4 million on the balance
sheet and a cumulative effect change in accounting principle of £33.8 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
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Source: VIRGIN MEDIA INVESTM, 10−K, March 01, 2007