Virgin Media 2007 Annual Report Download - page 163

VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Significant Accounting Policies (Continued)
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. Equipment revenue is stated net of discounts earned through service usage.
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 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 £104.9 million, £80.5 million
and £49.3 million in 2007, 2006 and 2005, respectively.
Stock-Based Compensation
We are an indirect, wholly-owned subsidiary of Virgin Media. Accordingly, we have no stock-based
compensation plans. Certain of our employees participate in the stock-based compensation plans of
Virgin Media, which are described in Virgin Media’s consolidated financial statements. Prior to
January 1, 2006 Virgin Media accounted for these plans using the fair value recognition provisions of
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