Virgin Media 2010 Annual Report Download - page 108

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 2—Significant Accounting Policies (continued)
components based on the “residual value” method. The amount of revenue recognized on the delivered
component is limited to the amount of cash collected.
Business
Rental revenues in respect of line rentals and rental of equipment provided to customers are recognized on a
straight-line basis over the term of the rental agreement.
Installation revenues are recognized in accordance with the Revenue Recognition Topic at the time the
installation is completed. When installation services are bundled with line or equipment rental we assess whether
the components of the arrangement 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 business customers do not generally have separately identifiable units of
accounting. Revenues from installation services not considered to represent a separate unit of accounting are
recognized over the expected life of the customer.
Subscriber Acquisition Costs
Costs incurred in respect of the acquisition of our customers, including payments to distributors and the cost
of mobile handsets and mobile handset promotions, are expensed as incurred.
Advertising Expense
We expense the cost of advertising as incurred. Advertising costs were £120.9 million, £100.8 million and
£92.8 million in 2010, 2009 and 2008, respectively.
Stock-Based Compensation
We have a number of stock-based employee compensation plans, as described more fully in note 11. We
account for these compensation plans in accordance with the Compensation—Stock Compensation Topic of the
FASB ASC. We measure stock-based compensation expense at fair value and record that expense based on our
estimate of the number of instruments for which the requisite service period is expected to be rendered. Awards
with graded vesting terms are recognized over the requisite service period for each separately vesting portion of
the award. Where applicable, modifications to the terms or conditions of an award are measured by comparing
the fair value of the modified award with the fair value of the award immediately before the modification.
Pensions
We account for our defined benefit pension arrangements in accordance with the Compensation-Retirement
Benefits Topic of the FASB ASC which requires that pension expense is recognized on an accrual basis over
employees’ approximate service periods. Pension expense calculated is generally independent of funding
decisions or requirements.
We recognize the funded status of our defined benefit postretirement plans on our balance sheet and changes
in the funded status are reflected in comprehensive income.
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