Virgin Media 2008 Annual Report Download - page 141

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 14—Income Taxes (Continued)
Deferred income taxes reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax
purposes. Significant components of deferred tax liabilities and assets are as follows (in millions):
December 31,
2008 2007
Deferred tax liabilities:
Intangibles .................................... £ 142.5 £ 221.9
Equity investments .............................. 79.2 81.0
Derivative instruments ........................... 15.7 —
Unrealized foreign exchange differences ............... 0.6 1.0
Total deferred tax liabilities .......................... 238.0 303.9
Deferred tax assets:
Net operating losses ............................. 1,108.7 1,001.1
Capital losses .................................. 3,390.1 3,411.4
Depreciation and amortization ...................... 2,098.5 2,129.4
Accrued expenses ............................... 40.1 20.1
Capital costs and other ........................... 165.0 217.1
Total deferred tax assets ............................ 6,802.4 6,779.1
Valuation allowance for deferred tax assets .............. (6,643.6) (6,556.2)
Net deferred tax assets ............................. 158.8 222.9
Net deferred tax liabilities .......................... £ 79.2 £ 81.0
The following table summarizes the movements in our deferred tax valuation allowance during the
years ended December 31, 2008, 2007 and 2006 (in millions):
Year ended December 31,
2008 2007 2006
Balance, January 1, ........................ £6,556.2 £6,707.6 £ 7,409.5
Acquisitions ............................ — — 699.1
Expiry of U.S. capital loss carryforwards ....... — — (1,541.7)
Effect of changes in tax rates ............... — (445.1) —
Increase in UK and US deferred tax attributes,
inclusive of foreign exchange movements ..... 87.4 293.7 140.7
Balance, December 31, ...................... £6,643.6 £6,556.2 £ 6,707.6
A valuation allowance is recorded to reduce the deferred tax asset to an amount that is more
likely than not to be realized. To the extent that the portion of the valuation allowance that existed at
January 10, 2003 is reduced, the benefit would reduce excess reorganization value, then reduce other
intangible assets existing at that date, then be credited to paid in capital. The majority of the valuation
allowance relates to tax attributes that existed at January 10, 2003. In 2008, we recognized a tax benefit
of £3.0 million which resulted in a deferred tax expense and a reduction in reorganization value of
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