Virgin Media 2008 Annual Report Download - page 105

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2—Significant Accounting Policies (Continued)
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 (FASB) Statement 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.
Intangible assets include trademark license agreements and customer lists. Trademark license
agreements represent the portion of purchase price allocated to agreements to license trademarks
acquired in business combinations. Trademark licenses are amortized over the period in which we
expect to derive benefits, which is principally five years. Customer lists represent the portion of the
purchase price allocated to the value of the customer base acquired in business combinations. Customer
lists are amortized on a straight-line basis over the period in which we expect to derive benefits, which
is principally three to six years.
Asset Retirement Obligations
We accrue for the liability in respect of dilapidation on our leasehold properties over the term of
the lease in accordance with FASB Statement No. 13, Accounting for Leases, or FAS 13.
In June 2005, the Financial Accounting Standards Board issued FASB Staff Position FAS 143-1,
Accounting for Electronic Equipment Waste Obligations, or FSP 143-1. The FASB issued FSP 143-1 to
address the accounting for certain obligations associated with the Waste Electrical and Electronic
Equipment Directive adopted by the European Union. FSP 143-1 requires that the commercial user
should apply the provisions of FASB Statement No. 143 and the related FASB Interpretation No. 47 to
certain obligations associated with historical waste (as defined by the Directive), since this type of
obligation is an asset retirement obligation. FSP 143-1 was effective for the later of the first reporting
period ending after June 8, 2005 or the Directive’s adoption into law by the applicable European
Union-member country. The Directive was adopted by the United Kingdom on December 12, 2006,
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