Virgin Media 2011 Annual Report Download - page 182

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)
additional fixed assets and replacement of existing fixed assets are capitalized. The costs of reconnecting the
same service to a previously installed premise are charged to expense in the period incurred. Costs for repairs and
maintenance are charged to expense as incurred.
Labor and overhead costs directly related to the construction and installation of fixed assets, including
payroll and related costs of some employees and related rent and other occupancy costs, are capitalized. The
payroll and related costs of some employees that are directly related to construction and installation activities are
capitalized based on specific time devoted to these activities where identifiable. In cases where the time devoted
to these activities is not specifically identifiable, we capitalize costs based upon estimated allocations.
Software Development Costs
We capitalize costs related to computer software developed or obtained for internal use in accordance with
the Intangibles—Goodwill and Other Topic of the Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”). Software obtained for internal use has generally been enterprise-level business
and finance software that we customize to meet our specific operational needs. Costs incurred in the application
development phase are capitalized and amortized over their useful lives, which are generally three to five years.
We have not sold, leased or licensed software developed for internal use to our customers and we have no
intention of doing so in the future. Amounts attributable to software development costs are included in fixed
assets and depreciation expense in the consolidated balance sheets and consolidated statements of operations
respectively.
Goodwill and Intangible Assets
Goodwill and other intangible assets with indefinite lives, such as reorganization value in excess of amount
allocable to identifiable assets, are not amortized and are tested for impairment annually or more frequently if
circumstances indicate a possible impairment exists in accordance with the Intangibles—Goodwill and Other
Topic of the FASB ASC.
In September 2011, the FASB issued guidance permitting companies to first assess qualitative factors as a
basis for determining whether it is necessary to perform the two-step goodwill impairment test. The guidance is
effective for goodwill impairment tests performed for fiscal years beginning after December 15, 2011; however,
early adoption is permitted. We adopted this guidance effective October 1, 2011 and applied it to the
performance of our annual goodwill impairment test for both the consumer and business reporting units.
Intangible assets include customer lists. Customer lists represent the portion of the purchase price allocated
to the value of the customer base acquired in business combinations. Customer lists are amortized on a straight-
line basis over the period in which we expect to derive benefits, which is principally three to six years.
Asset Retirement Obligations
We account for our obligations under the Waste Electrical and Electronic Equipment Directive adopted by
the European Union in accordance with the Asset Retirement and Environmental Obligations Topic of the FASB
ASC whereby we accrue the cost to dispose of certain of our customer premises equipment at the time of
acquisition. We also record asset retirement obligations for the estimated cost of removing leasehold
improvements and equipment that have been installed on leased network sites and administrative buildings.
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