Virgin Media 2006 Annual Report Download - page 94

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Significant Accounting Policies (Continued)
Installation fees in excess of direct selling costs are deferred and amortized over the expected life of the customer’s connection.
Rental revenue in respect of line rentals and rental of equipment provided to customers is recognized on a straight−line basis over
the term of the rental agreement.
Mobile handset and other equipment revenues are recognized when the goods have been delivered and title has passed.
Mobile service revenues include airtime, data, roaming and long−distance revenues and are invoiced and recorded as part of a
periodic billing cycle. Service revenues are recognized as the services are provided. At the end of each period, adjustments are
recorded to defer revenue relating to services billed in advance and to accrue for earned but unbilled services.
Contract and non−contract post−pay customers are billed in arrears based on usage and revenue is recognized when the service is
rendered and collectibility is reasonably assured. Revenue from non−contract pre−pay customers is recorded as deferred revenue prior
to commencement of services and is recognized as the services are rendered or usage expires.
Bundled services revenue is recognized in accordance with the provisions of EITF No 00−21, Accounting for revenue
arrangements with multiple deliverables, to assess whether the components of the bundled services should be recognized separately.
For bundled packages that have separately identifiable components, the total consideration is allocated to the different
components based on their relative fair values. Where the fair value of a delivered component cannot be determined reliably but the
fair value of the undelivered component can be, the fair value of the undelivered component is deducted from the total consideration
and the net amount is allocated to the delivered components based on the “residual value” method.
Programming revenues are recognized in accordance with SOP 00−2, Accounting by Producers or Distributors of Films.
Revenue on transactional and interactive sales is recognized as and when the services are delivered. Advertising sales revenue is
recognized at estimated realizable values when the advertising is aired.
Retail revenues are recognized on dispatch of goods to customers and are net of discounts given and less actual and expected
returns, refunds and credit card charge−backs.
Subscriber Acquisition Costs
Costs incurred in respect to the acquisition of customers of our Mobile segment, including payments to distributors and the cost
of handset promotions, are expensed as incurred.
Advertising Expense
We expense the cost of advertising as incurred. Advertising costs were £71.8 million, £51.1 million and £42.9 million in 2006,
2005 and 2004, respectively.
F−14
Source: VIRGIN MEDIA INVESTM, 10−K, March 01, 2007