Virgin Media 2007 Annual Report Download - page 160

VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED 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 economic lives of
the assets. Land and fixed assets held for sale are not depreciated. Estimated useful economic 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 Statement (FASB) No. 142, Goodwill
and Other Intangible Assets, or 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. We evaluate our Cable reporting unit for impairment on an annual basis
as at December 31, while all other reporting units are evaluated as at June 30. In the future, we may
incur impairment charges under FAS 142 if market values decline and we do not achieve expected cash
flow growth rates.
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