Virgin Media 2008 Annual Report Download - page 57

Goodwill and intangible asset impairments
We performed our annual impairment review for our Mobile, Virgin Media TV and sit-up
reporting units as at June 30, 2008. As a result of this review we concluded that the fair values of the
Virgin Media TV and sit-up reporting units exceeded their carrying value, while the Mobile reporting
unit’s fair value was less than its carrying value. As at December 31, 2008, we performed our annual
impairment review of the goodwill recognized in our Cable segment and concluded that its fair value
exceeded its carrying value.
The fair value of the Mobile reporting unit was determined through the use of a combination of
both market and income valuation approaches to calculate fair 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 recorded an
impairment charge of £362.2 million in relation to this reporting unit in the year ended December 31,
2008.
In September 2008, our sit-up reporting unit received notification that one of its two licenses to
broadcast over Freeview digital terrestrial television would not be renewed in January 2009. Along with
this, the downturn in the economy has had a negative impact on sit-up’s business. Management
performed a review of the implications of these changes on sit-up’s business model and, as a result, an
interim goodwill impairment review was performed. This review resulted in an impairment charge being
recognized of £14.9 million in relation to intangible assets and £39.9 million in relation to goodwill in
the year ended December 31, 2008.
Interest income and other, net
For the year ended December 31, 2008, interest income and other increased to £27.8 million from
£19.5 million for the year ended December 31, 2007, primarily as a result of higher interest income
receivable on higher cash balances during the year, together with the non-recurrence in 2008 of losses
incurred in 2007 on disposal of fixed assets. In 2007, interest income and other included gains on
disposal of investments of £8.1 million, offset by losses on disposal of fixed assets of £18.8 million.
Interest expense
For the year ended December 31, 2008, interest expense decreased to £493.3 million from
£514.2 million for the same period in 2007, mainly as a result of reductions in certain loan obligations
following voluntary repayments under our senior credit facility in December 2007 and April 2008,
partially offset by interest on the new convertible senior notes issued in April 2008 which funded the
repayment of higher cost bank debt.
We paid cash interest of £515.8 million for the year ended December 31, 2008 and £486.9 million
for the year ended December 31, 2007. The increase in cash interest payments resulted from changes in
the timing of interest payments.
Loss on extinguishment of debt
For the year ended December 31, 2008, loss on extinguishment of debt was £9.6 million which
related to the write off of deferred financing costs as a result of the prepayment of £804.0 million
under our senior credit facility during the year. For the year ended December 31, 2007, loss on
extinguishment of debt was £3.2 million which related to the write off of deferred financing costs as a
result of our partial repayments of £273.6 million under our senior credit facility during the year.
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