Virgin Media 2006 Annual Report Download - page 97

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Significant Accounting Policies (Continued)
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.
Loss from Continuing Operations Per Share and Net (Loss) Income Per Share
Basic and diluted loss from continuing operations per share and net (loss) income per share are computed by dividing the loss
from continuing operations and net (loss) income, respectively, by the average number of shares outstanding during the years ended
December 31, 2006, 2005 and 2004. Options and warrants to purchase 38.8 million shares at December 31, 2006 are excluded from
the calculation of diluted net loss from continuing operations per share, since the inclusion of such options and warrants is
anti−dilutive. The average number of shares outstanding is computed as follows (in millions) (as adjusted for the reverse acquisition
of Telewest):
Year ended December 31,
2006 2005 2004
Adjusted number of shares outstanding at start of period(1) 212.9 219.0 217.0
Issues of common stock 80.0 1.3 1.0
Repurchase of stock — (6.5) —
Average number of shares outstanding 292.9 213.8 218.0
(1) Excludes 2.4 million shares of restricted stock.
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 the application of FIN 48 these will be accounted for as an adjustment to retained
F−17
Source: VIRGIN MEDIA INVESTM, 10−K, March 01, 2007