Virgin Media 2010 Annual Report Download - page 107

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 2—Significant Accounting Policies (continued)
Revenue Recognition
We recognize revenue only when it is realized or realizable and earned. We recognize revenue when all of
the following are present:
• persuasive evidence of an arrangement exists between us and our customers;
• delivery has occurred or the services have been rendered;
• the price for the service is fixed or determinable; and
• collectibility is reasonably assured.
Revenue is stated net of value added tax, or VAT, collected from customers on behalf of U.K. tax
authorities.
Consumer
Fixed line telephone, cable television and internet revenues are recognized as the services are provided to
customers. At the end of each period, adjustments are recorded to defer revenue relating to services billed in
advance and to accrue for earned but unbilled services.
Installation revenues are recognized in accordance with the provisions of the Revenue Recognition Topic of
the FASB ASC, in relation to connection and activation fees for cable television, as well as fixed line telephone
and internet services, on the basis that we market and maintain a unified fiber network through which we provide
all of these services. Installation revenues are recognized at the time the installation has been completed to the
extent that those fees are less than direct selling costs, which is generally the case. Installation fees in excess of
direct selling costs are deferred and amortized over the expected life of the customer’s connection.
Bundled installation and service revenue is recognized in accordance with the guidance for multiple-
element arrangements where the components of these arrangements represent separate units of accounting and
the revenue from bundled components should be recognized separately. For bundled packages that have
separately identifiable units of accounting, the total consideration is allocated to the different components based
on their relative fair values. Our bundled arrangements for our residential customers do not generally have
separately identifiable units of accounting.
Mobile handset and other equipment revenues are recognized when the goods have been delivered and title
has passed. Equipment revenue is stated net of discounts earned through service usage.
Mobile service revenues include airtime, data, roaming and long-distance revenues and are invoiced and
recorded as part of a periodic billing cycle. Service revenues are recognized as the services are provided. At the
end of each period, adjustments are recorded to defer revenue relating to services billed in advance and to accrue
for earned but unbilled services. Revenue from non-contract pre-pay customers is recorded as deferred revenue
prior to commencement of services and is recognized as the services are rendered or usage rights expire.
In arrangements where mobile equipment and service revenue are bundled, we allocate revenue to the
components of the contract based on their relative fair value. Where the fair value of a delivered component
cannot be determined reliably but the fair value of the undelivered component can be, the fair value of the
undelivered component is deducted from the total consideration and the net amount is allocated to the delivered
F-12