Virgin Media 2009 Annual Report Download - page 52

capitalized. The costs of reconnecting the same service to a previously installed premise are charged to
expense in the period incurred. Costs for repairs and maintenance are charged to expense as incurred.
We assign fixed assets and intangible assets useful lives that impact the annual depreciation and
amortization expense. The assignment of useful lives involves significant judgments and the use of
estimates. Our management use their experience and expertise in applying judgments about appropriate
estimates. Changes in technology or changes in intended use of these assets may cause the estimated
useful life to change, resulting in higher or lower depreciation charges or asset impairment charges.
Long-lived assets and certain identifiable intangibles (intangible assets that do not have indefinite
lives) to be held and used by an entity are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with
the Property, Plant and Equipment Topic of the FASB ASC. Indications of impairment are determined
by reviewing undiscounted projected future cash flows. If impairment is indicated, the amount of the
impairment is the amount by which the carrying value exceeds the fair value of the assets.
Costs Associated with Construction and Installation Activities
Installation revenues are recognized in accordance with the provisions of the Entertainment—
Cable Television Topic of the FASB ASC, in relation to connection and activation fees for cable
television, as well as fixed line telephone and broadband internet services, on the basis that we market
and maintain a unified fiber network through which we provide all of these services. Installation
revenues in our Consumer segment are recognized at the time the installation has been completed to
the extent that those fees are less than direct selling costs. Installation fees in excess of direct selling
costs are deferred and amortized over the expected life of the customer’s connection.
The nature and amount of labor and other costs to be capitalized with respect to construction and
installation activities involves significant judgment. In addition to direct external and internal labor and
materials, we also capitalize other costs directly attributable to our construction and installation
activities. We continuously monitor the appropriateness of our capitalization policy and update the
policy when necessary to respond to changes in facts and circumstances, such as the development of
new products and services, and changes in the manner that installations or construction activities are
performed.
Restructuring Costs
We account for our restructuring costs in accordance with the Exit or Disposal Cost Obligations
Topic of the FASB ASC and recognize a liability for costs associated with restructuring activities when
the liability is incurred.
In relation to our restructuring activities, we have recorded a liability of £57.3 million as of
December 31, 2009 primarily relating to lease exit costs of properties that we have vacated. In
calculating the liability, we make a number of estimates and assumptions including the timing of
ultimate disposal of the properties, our ability to sublet the properties either in part or as a whole,
amounts of sublet rental income achievable including any incentives required to be given in subleases,
amounts of lease termination costs, and discount rates.
Recent Accounting Pronouncements
In June 2009, the FASB issued new guidance relating to the FASB Accounting Standards
Codification. Effective for interim or annual financial periods ending after September 15, 2009, the
ASC became the single official source of authoritative U.S. GAAP (other than guidance issued by the
SEC), superseding existing FASB, American Institute of Certified Public Accountants, Emerging Issues
Task Force (EITF), and related literature. After September 15, 2009, only one level of authoritative
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