Virgin Media 2010 Annual Report Download - page 104

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 2—Significant Accounting Policies (continued)
on the estimated fair value amounts. We have based these fair value estimates on pertinent information available
to us as of December 31, 2010 and 2009.
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. pound 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 and 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 £433.1 million and £370.4 million as at December 31, 2010 and
2009, respectively.
Restricted cash balances of £2.2 million as at December 31, 2010 and £6.0 million as at December 31, 2009
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, 2010, 2009 and 2008 are as follows (in
millions):
Year ended December 31,
2010 2009 2008
(Adjusted) (Adjusted)
Balance, January 1 .................................................. £ 9.0 £15.2 £ 17.0
Charged to costs and expenses ......................................... 25.4 24.4 31.3
Write offs, net of recoveries .......................................... (28.0) (30.6) (33.1)
Balance, December 31 ............................................... £ 6.4 £ 9.0 £15.2
Inventory
Inventory consists of consumer goods for re-sale. 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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