Virgin Media 2007 Annual Report Download - page 53

General
Other factors affecting our business include:
Currency Movements. We encounter currency exchange rate risks because substantially all of our
revenue and operating costs are earned and paid primarily in U.K. pounds sterling, but we pay interest
and principal obligations with respect to a portion of our existing indebtedness in U.S. dollars and
euros. We have implemented a hedging program to seek to mitigate the risk from these exposures. The
objective of this program is to reduce the volatility of our cash flows and earnings caused by changes in
underlying rates.
Integration. We continue to integrate our legacy NTL and Telewest cable businesses and Virgin
Mobile. This involves the incurrence of substantial operating and capital expenditures and, in some
cases, involves the outsourcing of key functions in an effort to achieve synergies through the integration
of the businesses. We will be completing the final stages of the integration of our cable billing
platforms during 2008. Any issues that may arise in connection with our integration could have a
material negative effect on our financial performance.
Critical Accounting Policies
Our consolidated financial statements and related financial information are based on the
application of U.S. Generally Accepted Accounting Principles, or GAAP. GAAP requires the use of
estimates, assumptions, judgments and subjective interpretations of accounting principles that have an
impact on the assets, liabilities, revenue and expense amounts reported, as well as disclosures about
contingencies, risk and financial condition. The following critical accounting policies have the potential
to have a significant impact on our financial statements. An impact could occur because of the
significance of the financial statement item to which these policies relate, or because these policies
require more judgment and estimation than other matters owing to the uncertainty related to
measuring, at a specific point in time, transactions that are continuous in nature.
These policies may need to be revised in the future in the event that changes to our business
occur.
Impairment of Long-Lived Assets and Indefinite-Lived Assets
Long-lived assets and certain identifiable intangibles (intangible assets that do not have indefinite
lives) to be held and used by an entity are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. Indications of
impairment are determined by reviewing undiscounted projected future cash flows. If impairment is
indicated, the amount of the impairment is the amount by which the carrying value exceeds the fair
value of the assets.
Goodwill arising from business combinations, reorganization value in excess of amounts allocable
to identifiable assets and intangible assets with indefinite lives, are subject to annual review for
impairment (or more frequently should indications of impairment arise). Impairment of goodwill and
reorganization value in excess of amounts allocable to identifiable assets is determined using a two-step
approach, initially based on a comparison of the reporting unit’s fair value to its carrying value; if the
fair value is lower than the carrying value, then the second step compares the asset’s fair value (implied
fair value for goodwill and reorganization value in excess of amounts allocable to identifiable assets)
with its carrying value to measure the amount of the impairment. Impairment of intangible assets with
indefinite lives is determined based on a comparison of fair value to carrying value. Any excess of
carrying value over fair value is recognized as an impairment loss. 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 Financial Accounting Standards
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