Virgin Media 2009 Annual Report Download - page 171

VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2—Significant Accounting Policies (Continued)
The estimates presented in these consolidated financial statements are not necessarily indicative of the
amounts that we could realize in a current market exchange. The use of different market assumptions
and/or estimation methodologies may have a material effect on the estimated fair value amounts. We
have based these fair value estimates on pertinent information available to us as of December 31, 2009
and 2008.
Foreign Currency Translation
Our reporting currency is the pound sterling because substantially all of our revenues, operating
costs and selling general and administrative expenses are denominated in U.K. pounds sterling.
Exchange gains and losses on translation of our net equity investments in subsidiaries having functional
currencies other than the pound sterling are reported as a separate component of accumulated other
comprehensive income in shareholders’ equity. Foreign currency transactions involving amounts
denominated in currencies other than a subsidiary’s functional currency are recorded at the exchange
rate ruling at the date of the transaction and are remeasured each period with gains and losses
recorded in the consolidated statement of operations.
Cash Equivalents and Restricted Cash
Cash equivalents are short term highly liquid investments purchased with an original maturity of
three months or less. We had cash equivalents totaling £356.6 million and £120.2 million as at
December 31, 2009 and 2008, respectively.
Restricted cash balances of £5.3 million as at December 31, 2009 and 2008 represent cash balances
collateralized against performance bonds given on our behalf.
Trade Receivables
Our trade receivables are stated at outstanding principal balance, net of allowance for doubtful
accounts. Allowances for doubtful accounts are estimated based on the current aging of trade
receivables, prior collection experience and future expectations of conditions that might impact
recoverability. The movements in our allowance for doubtful accounts for the years ended
December 31, 2009, 2008 and 2007 are as follows (in millions):
Year ended December 31,
2009 2008 2007
Balance, January 1 .............................. £16.5 £ 17.1 £ 49.4
Charged to costs and expenses ................... 25.2 30.1 30.3
Write offs, net of recoveries ..................... (32.1) (30.7) (62.6)
Balance, December 31 ........................... £ 9.6 £16.5 £ 17.1
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.
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