Virgin Media 2009 Annual Report Download - page 104

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2—Significant Accounting Policies (Continued)
On April 1, 2009, we sold our sit-up reporting unit, which was formerly included within our
Content segment. In accordance with the provisions of the Property, Plant and Equipment Topic of the
Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, the
planned sale of the sit-up business met the requirements for sit-up to be reflected as assets and
liabilities held for sale and discontinued operations in both the current and prior periods. These
consolidated financial statements reflect sit-up, as assets and liabilities held for sale and discontinued
operations, and we have retrospectively adjusted the balance sheet as of December 31, 2008 and
statements of operations, cash flows and shareholders’ equity for the years ended December 31, 2008
and 2007.
In May 2008, the FASB issued new guidance which requires that the liability and equity
components of convertible debt instruments that may be settled in cash upon conversion (including
partial cash settlement) be separately accounted for in a manner that reflects an issuer’s nonconvertible
debt borrowing rate. As a result, the liability component is recorded at a discount reflecting its below
market coupon interest rate, and is subsequently accreted to its par value over its expected life, with
the rate of interest that reflects the market rate at issuance being reflected in the results of operations.
We adopted the guidance on January 1, 2009 as our convertible senior notes are within the scope of
the guidance and we have applied it on a retrospective basis, whereby our prior period financial
statements have been adjusted.
Principles of Consolidation
The consolidated financial statements include the accounts for us and our wholly owned
subsidiaries. Intercompany accounts and transactions have been eliminated on consolidation. The
operating results of acquired companies are included in our consolidated statements of operations from
the date of acquisition.
For investments in which we own 20% to 50% of the voting shares and have significant influence
over the operating and financial policies, the equity method of accounting is used. Accordingly, our
share of the earnings and losses of these companies are included in the share of income (losses) in
equity investments in the accompanying consolidated statements of operations. For investments in
which we own less than 20% of the voting shares and do not have significant influence, the cost
method of accounting is used. Under the cost method of accounting, we do not record our share in the
earnings and losses of the companies in which we have an investment and such investments are
generally reflected in the consolidated balance sheet at historical cost.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Such estimates and assumptions impact, among others, the following: the amount
of uncollectible accounts receivable, the amount to be paid to terminate certain agreements included in
restructuring costs, amounts accrued for vacated properties, the amount to be paid for other liabilities,
including contingent liabilities, our pension expense and pension funding requirements, amounts to be
paid under our employee incentive plans, costs for interconnection, the amount of costs to be
capitalized in connection with the construction and installation of our network and facilities, goodwill
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