Virgin Media 2010 Annual Report Download - page 143

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 14—Income Taxes (continued)
The total amount of unrecognized tax benefits as of December 31, 2010, 2009 and 2008 was £9.9 million,
£10.0 million and £20.4 million respectively. Included in the balance of unrecognized tax benefits as of
December 31, 2010, 2009 and 2008 were £0.1 million, £0.5 million and £1.0 million respectively that, if
recognized, would impact the effective tax rate.
We recognize interest and penalties related to unrecognized tax benefits in income tax expense. We have
accrued interest in respect of unrecognized tax benefits of nil and £0.2 million at December 31, 2010 and 2009,
respectively. The statute of limitations is open for the years 2007 to 2010 in the U.S. and 2009 to 2010 in the
U.K., our major tax jurisdictions.
At each period end, it is necessary for us to make certain estimates and assumptions to compute the
provision for income taxes including, but not limited to the expected operating income (or loss) for the year,
projections of the proportion of income (or loss) earned and taxed in the U.K. and the extent to which this income
(or loss) may also be taxed in the United States, permanent and temporary differences, the likelihood of deferred
tax assets being recovered and the outcome of contingent tax risks. In the normal course of business, our tax
returns are subject to examination by various taxing authorities. Such examinations may result in future tax and
interest assessments by these taxing authorities for uncertain tax positions taken in respect to matters such as
business acquisitions and disposals and certain financing transactions including intercompany transactions,
amongst others. We accrue a liability when we believe an assessment may be probable and the amount is
estimable. In accordance with generally accepted accounting principles, the impact of revisions to these estimates
is recorded as income tax expense or benefit in the period in which they become known. Accordingly, the
estimates used to compute the provision for income taxes may change as new events occur, as more experience is
acquired, as additional information is obtained and as our tax environment changes.
Note 15—Related Party Transactions
Virgin Enterprises Limited
We have identified Virgin Enterprises Limited as a related party to us. Virgin Entertainment Investment
Holdings Limited became a holder of our common stock as a result of our acquisition of Virgin Mobile on July 4,
2006. As of December 31, 2010, Virgin Entertainment Investment Holdings Limited beneficially owned 4.8% of
our common stock (based on SEC filings). Virgin Enterprises Limited is a wholly owned subsidiary of Virgin
Entertainment Investment Holdings Limited. In addition, Gordon McCallum is a member of our Board of
Directors and is a Director of Virgin Enterprises Limited.
We own and have the right to use registered trademarks, including the exclusive right to use the “Virgin”
name and logo in connection with our corporate activities and in connection with the activities of our consumer
business under license from Virgin Enterprises Limited. This license with Virgin Enterprises Limited is for a
30-year term and exclusive to us within the U.K. and Ireland. The license entitles us to use the “Virgin” name for
the TV, broadband internet, telephone and mobile phone services we provide to our residential customers, as well
as the acquisition and branding of sports, movies and other premium television content and the sale of certain
communications equipment, such as set top boxes and cable modems. Our license agreement provides for an
annual royalty of 0.25% of certain consumer revenues, subject to a minimum annual royalty of £8.5 million. As
part of the agreement, we have the right to adopt, and have adopted, a company name for our parent, Virgin
Media Inc., over which together with the name “Virgin Media”, we retain worldwide exclusivity. Under a related
agreement, Virgin Enterprises Limited has the right to propose a candidate to fill a seat on our Board of
Directors. Pursuant to this right, Virgin Enterprises Limited proposed Gordon McCallum who was appointed to
our Board of Directors.
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