Virgin Media 2011 Annual Report Download - page 29

a risk that the Internal Revenue Service, or IRS, may seek to challenge the amount of that tax basis or that we
will not be able to utilize such basis under applicable tax law. As a result, although in accordance with applicable
law we will seek to minimize our U.S. tax liability as well as our overall worldwide tax liability, we may incur
U.S. tax liabilities with respect to repatriation of cash from our U.K. subsidiaries to the United States. The
amount of the tax liability, if any, would depend upon a multitude of factors, including the amount of cash
actually repatriated.
We also pay Value Added Tax, or VAT, on our revenue generating activities in the U.K. From time to time,
the U.K. tax authorities review the basis upon which our VAT liability is assessed. We are currently engaged in a
dispute with the tax authorities over one of these reviews. See “Management’s Discussion and Analysis of
Financial Condition and Results of Operations—Consolidated Results of Operations—Consolidated Results of
Operations for the Years Ended December 31, 2011 and 2010—Contingent Losses.”
Acquisitions and other strategic transactions present many risks, and we may not realize the financial and
strategic goals that were contemplated at the time of any transaction.
From time to time we have made acquisitions, dispositions and have entered into other strategic
transactions. In connection with such transactions, we may incur unanticipated expenses, fail to realize
anticipated benefits, have difficulty integrating the acquired businesses, disrupt relationships with current and
new employees, customers and suppliers, incur significant indebtedness, or experience delays or fail to proceed
with announced transactions. These factors could have a material adverse effect on our business and/or our
reputation.
We have suffered losses due to asset impairment charges for goodwill and indefinite-lived intangible assets
and could do so again in the future.
In accordance with the Intangibles—Goodwill and Other Topic of the Financial Accounting Standards
Board Accounting Standards Codification, or FASB ASC, goodwill and indefinite-lived intangible assets are
subject to annual review for impairment (or more frequently should indications of impairment arise). In addition,
other intangible assets are also reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable, in accordance with the Property, Plant and
Equipment Topic of the FASB ASC. On December 31, 2011, we had goodwill and intangible assets of £2,017.5
billion. A downward revision in the fair value of a reporting unit or intangible assets could result in an
impairment charge being required. Any downward revision in the fair value of our goodwill and indefinite-lived
intangible assets has a material effect on our reported net income.
We are subject to significant regulation, and changes in U.K. and EU laws, regulations or governmental
policy affecting the conduct of our business may have a material adverse effect on our ability to set prices,
enter new markets or control our costs.
Our principal business activities are regulated and supervised by Ofcom and the U.K. Office of Fair
Trading, among other regulators. Regulatory change is an ongoing process in the communications sector at both
U.K. and EU level. Changes in laws, regulations or governmental policy affecting our activities and those of our
competitors could significantly influence how we operate our business and introduce new products and services.
For example, regulatory changes relating to our activities and those of our competitors, such as changes relating
to third party access to cable networks, the costs of interconnection with other networks or the prices of
competing products and services, or any change in policy allowing more favorable conditions for other operators,
could adversely affect our ability to set prices, enter new markets or control our costs. In particular, following the
transposition of recent amendments to European directives into U.K. law, Ofcom may attempt to use the
non-significant market power, or non-SMP, access provisions to require us to make available access to our
network to third parties. In addition, Ofcom may look to impose regulation on the cable network, which is
currently unregulated. Such regulation would allow customers to switch with ease to another provider without
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