Virgin Media 2009 Annual Report Download - page 115

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 4—Disposals (Continued)
In accordance with the sale agreement, part of the consideration included a loan note from the
purchasers. On April 1, 2009, we entered into a five-year carriage agreement with sit-up for continued
distribution of the three sit-up channels on our television platform. In general, the agreements
governing the loan note and exchange of services between us and sit-up are for specified periods at
commercial rates. Following the sale, our continuing involvement with sit-up is limited to the loan note
and carriage agreement and is therefore not considered significant. The loan note was repaid during
the year ended December 31, 2009.
As at December 31, 2008, we performed an interim goodwill impairment review of our sit-up
reporting unit. In September 2008, we received notification that one of our two licenses to broadcast
over Freeview digital terrestrial television would not be renewed. Along with this, the downturn in the
economy had reduced the level of retail sales. As a result, management concluded that indicators
existed that suggested it was more likely than not that the fair value of this reporting unit was less than
its carrying value.
The fair value of the sit-up reporting unit, which was determined through the use of a combination
of both the market and income approaches to calculate fair value, was found to be less than the
carrying value. The market and income approaches declined from the goodwill impairment test we
performed as at June 30, 2008 as a result of reduced long term cash flow estimates. As a result, we
extended our review to include the valuation of the reporting unit’s individual assets and liabilities and
recognized a goodwill impairment charge of £39.9 million. During the year ended December 31, 2008,
we impaired intangible assets relating to our sit-up reporting unit totaling £14.9 million. Subsequent to
the year end, in accordance with the provisions of the Property, Plant, and Equipment Topic of the
FASB ASC, we wrote down the assets held for sale to fair value based upon the agreed purchase
consideration. This resulted in a £19.0 million impairment charge, which was recognized in the loss
from discontinued operations for the year ended December 31, 2009.
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