Virgin Media 2010 Annual Report Download - page 147

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 17—Commitments and Contingent Liabilities (Continued)
counsel and other information and events pertaining to a particular case. Whilst litigation is inherently
unpredictable, we believe that we have valid defenses with respect to legal matters pending against us.
Nevertheless, it is possible that cash flows or results of operations could be materially affected in any particular
period by the unfavorable resolution of one or more of these contingencies, or because of the diversion of
management’s attention and the creation of significant expenses.
Our revenue generating activities are subject to Value Added Tax, or VAT. The U.K. tax authorities have
challenged our VAT treatment of certain of these activities. As a result, we have estimated contingent losses
totaling £62.5 million as of December 31, 2010 that are not accrued for as we do not deem them to be probable of
resulting in a liability. Any challenge of the VAT treatment of these activities could be subject to court
proceedings before a potential settlement would be required. We currently expect an initial hearing on these
matters to take place in late 2011 or early 2012.
Our banks have provided guarantees in the form of stand by letters of credit on our behalf as part of our
contractual obligations. The amount of commitment expires over the following periods (in millions):
Year ending December 31:
2011 ............................................... £14.9
2012 ............................................... —
2013 ............................................... —
2014 ............................................... —
2015 ............................................... —
Thereafter ........................................... 2.1
£17.0
Note 18—Industry Segments
Our reporting segments are based on our method of internal reporting along with the criteria used by our
chief executive officer, who is our chief operating decision maker (CODM), to evaluate segment performance,
the availability of separate financial information and overall materiality considerations. Our internal reporting
structure and the related financial information used by management and the CODM reflect changes we have
made after the announcement of the sale of Virgin Media TV, which comprised our Content segment, to BSkyB
in June 2010. Following this announcement we have two reporting segments, Consumer and Business, as
described below.
Our Consumer segment is our primary segment, consisting of the distribution of television programming,
broadband and fixed line telephone services to residential customers on our cable network, the provision of
broadband and fixed line telephone services to residential customers outside of our cable network, and the
provision of mobile telephony and mobile broadband to residential customers.
Our Business segment comprises our operations carried out through Virgin Media Business which provides
voice, data and internet solutions to businesses, public sector organizations and service providers in the U.K.
Segment contribution, which is operating income before network operating costs, corporate costs,
depreciation, amortization, goodwill and intangible asset impairments and restructuring and other charges, is
management’s measure of segment profit. Segment contribution excludes the impact of certain costs and
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