Virgin Media 2011 Annual Report Download - page 45

regulated by the U.K. Office of Communications; however, in respect of non-regulated product pricing, the
market is increasingly price sensitive, particularly in the current challenging economic conditions.
Operational Effectiveness. The extensive use of optical fiber in our access networks allows us to provide
high-speed ethernet services directly to business customers and to provide nationwide area networking to these
customers via our core networks. Business customers require timely installation services and our ability to meet
required timescales and commence providing services may impact our revenues. We regularly rely on third-party
suppliers to connect business customers and we have a variety of alternative methods to connect our national
telecommunications network to the premises of business customers that are located outside of our cabled areas.
Government Spending. Public sector organizations, in particular local authorities, represent a significant
proportion of the customer base in our Business segment. Accordingly, changes to the U.K. government’s
allocation of funding and spending levels with respect to certain programs have had, and may continue to have,
an effect on our Business segment revenue.
Critical Accounting Policies
Our consolidated financial statements and related financial information are based on the application of U.S.
GAAP. GAAP requires the use of estimates, assumptions, judgments and subjective interpretations of accounting
principles that have an impact on the assets, liabilities, revenue and expense amounts reported, as well as
disclosures about contingencies, risk and financial condition. Actual results may differ from these estimates
under different assumptions and conditions. The following critical accounting policies have the potential to have
a significant impact on our financial statements. An impact could occur because of the significance of the
financial statement item to which these policies relate, or because these policies require more judgment and
estimation than other matters owing to the uncertainty related to measuring, at a specific point in time,
transactions that are continuous in nature.
We have discussed the development and selection of the following critical accounting policies with the
Audit Committee of our Board of Directors, and the Audit Committee has reviewed our disclosures relating to
them.
These policies may need to be revised in the future in the event that changes to our business occur.
Fixed Assets
We assign fixed assets and intangible assets useful lives that impact the annual depreciation and
amortization expense. The assignment of useful lives involves significant judgments and the use of estimates.
Our management use their experience and expertise in applying judgments about appropriate estimates. We also
compare the useful lives assigned to fixed assets to other companies that operate similar business. Changes in
technology or changes in intended use of these assets may cause the estimated useful life to change, resulting in
higher or lower depreciation charges or asset impairment charges. As an example, we have reviewed the useful
lives of the assets that support our non-TiVo television set-top box platform based on our current intentions.
While we have concluded that no adjustment to the useful lives is required, it is possible that a material change to
our current plans could change this conclusion.
Long-lived assets and certain identifiable intangibles (intangible assets that do not have indefinite lives) to
be held and used by an entity are 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 Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”). Indications of impairment are determined by reviewing undiscounted projected future cash flows. If
impairment is indicated, the amount of the impairment is the amount by which the carrying value exceeds the fair
value of the assets.
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