Virgin Media 2010 Annual Report Download - page 196

VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES
VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES
COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 2—Significant Accounting Policies (continued)
Leases
Our leasing activities are principally related to administrative facilities, network related facilities, retail
facilities and operating equipment. These leases generally provide us with renewal options. Certain leases contain
fluctuating or escalating payments and rent holiday periods. The related rent expense is recorded on a straight
line basis over the lease term.
Contingent rent is not a material component of our total rent expense.
Income Taxes
We provide for income taxes in accordance with the Income Taxes Topic of the FASB ASC. Judgment is
required in determining our provision for income taxes, deferred tax assets and liabilities and the extent to which
valuation allowances are necessary to reduce our deferred tax assets. We recognize valuation allowances if it is
not more likely than not that sufficient taxable income will be available in the future against which the temporary
differences and unused tax losses can be utilized. We have considered future taxable income and tax planning
strategies in assessing whether deferred tax assets should be recognized.
Note 3—Recent Accounting Pronouncements
In 2009, the FASB amended the accounting standards for revenue recognition to:
• provide updated guidance on whether multiple deliverables exist, how the deliverables in an
arrangement should be separated, and how the consideration should be allocated;
• require an entity to allocate revenue in an arrangement using estimated selling prices (ESP) of
deliverables if a vendor does not have vendor-specific objective evidence of selling price (VSOE) or
third-party evidence of selling price (TPE); and
• eliminate the use of the residual method and require an entity to allocate revenue using the relative
selling price method.
We adopted this guidance as of January 1, 2011 on a prospective basis applicable for transactions
originating or materially modified after that date. Revenue is allocated to each unit of accounting based on a
selling price hierarchy. The selling price for a deliverable is based on its vendor-specific objective evidence
(VSOE) if available, third party evidence (TPE) if VSOE is not available, or estimated selling price (ESP) if
neither VSOE nor TPE is available. We then recognize revenue on each deliverable in accordance with our
policies for product and service revenue recognition. The adoption of this guidance is not expected to have a
material impact on our consolidated financial statements.
In January 2010, the FASB issued new guidance for fair value measurements and disclosures. The guidance
improves disclosures about fair value measurements by requiring a greater level of disaggregated information
and more robust disclosures about valuation techniques and inputs to fair value measurements. In addition, the
guidance requires separate disclosure of amounts of significant transfers in and out of Levels 1 and 2 of the fair
value hierarchy and a reconciliation of fair value measurements using significant unobservable inputs (Level 3 of
the fair value hierarchy). We have adopted the disclosure requirements of this standard which did not have a
material impact on our consolidated financial statements.
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