Virgin Media 2008 Annual Report Download - page 120

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 6—Goodwill and Intangible Assets (Continued)
During the years ended December 31, 2008 and 2007, assets not subject to amortization were
adjusted for the following (in millions):
Reorganization
Tradenames Value Goodwill
Balance, December 31, 2006 ........................... £16.5 £148.3 £2,351.7
Deferred tax balances ............................... — (2.2) (14.9)
Disposal of business units ............................ — — (1.5)
Finalization of purchase accounting fair values ............. — — (9.7)
Balance, December 31, 2007 ........................... £16.5 £146.1 £2,325.6
Deferred tax balances ............................... — (2.0) (1.3)
Goodwill and intangible asset impairments ................ (0.5) — (402.1)
Balance, December 31, 2008 ........................... £16.0 £144.1 £1,922.2
As at June 30, 2008, we performed our annual impairment review of the goodwill recognized in
the Virgin Media TV and sit-up reporting units, included in our Content segment, and the Mobile
reporting unit. The fair value of these reporting units were determined through the use of a
combination of both the market and income valuation approaches to calculate fair value. We concluded
that the fair value of the Virgin Media TV and sit-up reporting units exceeded their carrying value,
while the Mobile reporting unit fair value was less than its carrying value.
The market approach valuations in respect of the Mobile reporting unit have declined from the
prior year primarily as a result of declining market multiples of comparable companies. The income
approach valuations in respect of the Mobile reporting unit declined as a result of a combination of an
increased discount rate, a reduced terminal value multiple and reduced long term cash flow estimates.
As a result, we extended our review to include the valuation of the Mobile reporting unit’s individual
assets and liabilities and have recognized a goodwill impairment charge of £362.2 million in the year
ended December 31, 2008.
As at December 31, 2008, we performed an interim goodwill impairment review of our sit-up
reporting unit. In September 2008, we received notification that one of our two licenses to broadcast
over Freeview digital terrestrial television would not be renewed. Along with this, the downturn in the
economy has reduced the level of retail sales. As a result, management concluded that indicators
existed that suggested it was more likely than not that the fair value of this reporting unit was less than
its carrying value.
The fair value of the sit-up reporting unit, which was determined through the use of a combination
of both the market and income approaches to calculate fair value, was found to be less than the
carrying value. The market and income approaches declined as a result of reduced long term cash flow
estimates. As a result, we extended our review to include the valuation of the reporting unit’s individual
assets and liabilities and recognized a goodwill impairment charge of £39.9 million.
As at December 31, 2008, we performed our annual impairment review of the goodwill recognized
in our Cable segment and concluded that no impairment charge was necessary.
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