Virgin Media 2008 Annual Report Download - page 201

VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 13—Income Taxes (Continued)
There are significant current year losses in the U.K. The current tax benefit relates to amounts
receivable in respect of the sale of U.K. tax losses to an equity method investee. The 2008 federal
deferred tax benefit largely relates to holding an equity method investment. The foreign deferred tax
benefit relates to the decrease in our deferred tax asset valuation resulting from the recording of
certain deferred tax liabilities related to amounts recognized in the statement of other comprehensive
income during the year that are expected to reverse in future periods and will allow us to offset such
amounts against certain deferred tax assets.
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 .................................... £ 143.2 £ 221.3
Equity investments .............................. 79.2 81.0
Derivative instruments ........................... 15.7 —
Total deferred tax liabilities .......................... 238.1 302.3
Deferred tax assets:
Net operating losses ............................. 970.0 886.1
Capital losses .................................. 3,388.6 3,410.4
Depreciation and amortization ...................... 2,047.7 2,069.8
Accrued expenses ............................... 36.8 16.6
Capitalized costs and other ........................ 163.3 216.1
Total deferred tax assets ............................ 6,606.4 6,599.0
Valuation allowance for deferred tax assets .............. (6,447.5) (6,377.7)
Net deferred tax assets ............................. 158.9 221.3
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, ......................... £6,377.7 £6,543.7 £5,717.6
Acquisitions ............................ — — 699.1
Effect of changes in tax rates ................ — (446.4) —
Increase in UK deferred tax attributes ......... 69.8 280.4 127.0
Balance, December 31, ...................... £6,447.5 £6,377.7 £6,543.7
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
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