Virgin Media 2008 Annual Report Download - page 171

VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2—Significant Accounting Policies (Continued)
Inventory
Inventory consists of consumer goods for re-sale and programming inventory. Consumer goods for
re-sale are valued at the lower of cost or market value using the first-in, first-out, or FIFO method.
Cost represents the invoiced purchase cost of inventory. This valuation requires us to make judgments,
based on currently available information, about obsolete, slow-moving or defective inventory. Based
upon these judgments and estimates, which are applied consistently from period to period, we adjust
the carrying amount of our inventory for re-sale to the lower of cost or market value.
Programming inventory represents television programming libraries held by each of our television
channels and is stated at the lower of cost or market value. Programming is recognized as inventory
when a contractual purchase obligation exists, it has been delivered to us and is within its permitted
broadcasting period. Programming inventory is periodically reviewed and a provision made for
impairment or obsolescence.
Fixed Assets
Depreciation is computed by the straight-line method over the estimated useful economic lives of
the assets. Land and fixed assets held for sale are not depreciated. Estimated useful economic lives are
as follows:
Operating equipment:
Cable distribution plant .................. 8–30 years
Switches and headends .................. 8–10 years
Customer premises equipment ............. 5–10 years
Other operating equipment ............... 8–20 years
Other equipment:
Buildings ............................ 20 years
Leasehold improvements ................. 7 years or, if less, the lease term
Computer infrastructure ................. 3–5 years
Other equipment ....................... 5–12 years
The cost of fixed assets includes amounts capitalized for labor and overhead expended in
connection with the design and installation of our operating network equipment and facilities. Costs
associated with initial customer installations, additions of network equipment necessary to enable
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.
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