Virgin Media 2007 Annual Report Download - page 158

VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Significant Accounting Policies (Continued)
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Such estimates and assumptions impact, among others, the following: the amount
of uncollectible accounts receivable, the amount to be paid to terminate certain agreements included in
restructuring costs, amounts accrued for vacated properties, the amount to be paid for other liabilities,
including contingent liabilities, our pension expense and pension funding requirements, amounts to be
paid under our employee incentive plans, costs for interconnection, the amount of costs to be
capitalized in connection with the construction and installation of our network and facilities, long-lived
assets, certain other intangible assets and the computation of our income tax expense and liability.
Actual results could differ from those estimates.
Fair Values
We have determined the estimated fair value amounts presented in these consolidated financial
statements using available market information and appropriate methodologies. However, considerable
judgment is required in interpreting market data to develop the estimates of fair value. The estimates
presented in these consolidated financial statements are not necessarily indicative of the amounts that
we could realize in a current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair value amounts. We have
based these fair value estimates on pertinent information available to us as of December 31, 2007 and
2006. As at December 31, 2007, we had not adopted the fair value principles of FASB Statement
No. 157, Fair Value Measurements.
Principles of Consolidation
The consolidated financial statements include the accounts for us and our wholly-owned
subsidiaries. Intercompany accounts and transactions have been eliminated on consolidation. Our
consolidated financial statements also include the accounts of variable interest entities, or VIEs, which
are entities that among other things, lack sufficient equity to finance their activities without additional
support from other parties. All significant intercompany accounts and transactions have been
eliminated. The operating results of acquired companies are included in our consolidated statement of
operations from the date of acquisition.
For investments in which we own 20% to 50% of the voting shares and have significant influence
over the operating and financial policies, the equity method of accounting is used. Accordingly, our
share of the earnings and losses of these companies are included in the share of income (losses) in
equity investments in the accompanying consolidated statements of operations. For investments in
which we own less than 20% of the voting shares and do not have significant influence, the cost
method of accounting is used. Under the cost method of accounting, we do not record our share in the
earnings and losses of the companies in which we have an investment and such investments are
generally reflected in the consolidated balance sheet at historical cost.
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