Virgin Media 2007 Annual Report Download - page 54

Board Statement No. 142, Accounting for Goodwill and Other Intangible Assets, or FAS 142, if market
values decline and we do not achieve expected cash flow growth rates.
Estimated fair market value is generally measured by discounting estimated future cash flows.
Considerable management judgment is necessary to estimate discounted future cash flows and those
estimates include inherent uncertainties, including those relating to the timing and amount of future
cash flows and the discount rate used in the calculation. Assumptions used in these cash flows are
consistent with our internal forecasts. If actual results differ from the assumptions used in the
impairment review, we may incur additional impairment charges in the future.
Fixed Assets
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. Costs associated with initial customer installations 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.
We assign fixed assets and intangible assets useful lives that impact the annual depreciation and
amortization expense. The assignment of useful lives involves significant judgments and the use of
estimates. Our management use their experience and expertise in applying judgments about appropriate
estimates. Changes in technology or changes in intended use of these assets may cause the estimated
useful life to change, resulting in higher or lower depreciation charges or asset impairment charges.
Business Combinations
We are required to allocate the purchase price of acquired companies to the tangible and
intangible assets acquired and liabilities assumed based on their fair values. We engage third party
appraisal firms to assist us in determining the fair values of assets acquired and liabilities assumed.
Such a valuation requires management to make significant estimates and assumptions, especially with
respect to intangible assets.
Critical estimates in valuing certain of the intangible assets include but are not limited to: future
expected cash flows from customer contracts and customer lists; the trademark’s brand awareness and
market position, as well as assumptions about the period of time the brand will continue to be used in
the combined company’s product portfolio and discount rates. Management’s assumptions about fair
value are based upon assumptions believed to be reasonable, but which are inherently uncertain and
unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated events and
circumstances may occur, which may affect management’s estimates.
Other estimates associated with the accounting for these acquisitions may change as additional
information becomes available regarding the assets acquired and liabilities assumed. In particular,
liabilities in relation to tax exposures or liabilities to restructure the pre-acquisition businesses of NTL,
Telewest and Virgin Mobile, including the exit of properties and termination of employees, are revised
as estimates are updated.
Restructuring Costs
As of January 1, 2003, we adopted FASB Statement No. 146, Accounting for Costs Associated with
Exit or Disposal Activities, or FAS 146, and recognize a liability for costs associated with restructuring
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