Virgin Media 2012 Annual Report Download - page 79

F-8
Trade Receivables
Our trade receivables are stated at outstanding principal balance, net of allowance for doubtful accounts. Allowances
for doubtful accounts are estimated based on the current aging of trade receivables, prior collection experience and
future expectations of conditions that might impact recoverability. Amounts charged to expense are included in selling,
general and administrative expenses in the consolidated statement of comprehensive income. The movements in our
allowance for doubtful accounts for the years ended December 31, 2012, 2011 and 2010 are as follows (in millions):
Year ended December 31,
2012 2011 2010
Balance, January 1 £ 10.9 £ 6.4 £ 9.0
Charged to costs and expenses 30.2 32.6 25.4
Write offs, net of recoveries (32.1) (28.1) (28.0)
Balance, December 31 £ 9.0 £ 10.9 £ 6.4
Inventory
Inventory consists of consumer goods for re-sale. Consumer goods for re-sale are valued at the lower of cost or market
value using the first-in, first-out, or FIFO, method. Cost represents the invoiced purchase cost of inventory. This valuation
requires us to make judgments, based on currently available information, about obsolete, slow-moving, or defective
inventory. Based upon these judgments and estimates, which are applied consistently from period to period, we adjust
the carrying amount of our inventory for re-sale to the lower of cost or market value. Included within prepaid expenses
and other current assets is inventory of £17.5 million and £13.1 million as at December 31, 2012 and 2011, respectively.
Fixed Assets
Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Land is not
depreciated. Estimated useful lives are as follows:
Operating equipment:
Cable distribution plant 5-30 years
Switches and headends 3-10 years
Customer premises equipment 5-10 years
Other operating equipment 4-20 years
Other equipment:
Buildings 20-50 years
Leasehold improvements 7 years or, if less, the lease term
Computer infrastructure 3-5 years
Other equipment 5-10 years
Costs associated with network construction, initial customer installations, initial installations of new services in customer
premises, and the addition of network equipment to provide new or enhanced services are capitalized. Costs capitalized
as part of initial customer installations include materials and direct labor.
Capitalizable labor costs incurred in connection with customer installations relate to activities such as:
• Dispatching personnel and equipment to the customer's premises;
• Verification that the customer's premises are able to properly receive our services;
• Physically connecting the customer's premises to our network;
• Set-up of equipment within the customer's premises and connection of that equipment to our network; and
• Programming the equipment so that it is able to function as intended.
Table of Contents
VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 2—Significant Accounting Policies (continued)