Virgin Media 2013 Annual Report Download - page 39

VIRGIN MEDIA INC.
(See note 1)
Notes to Consolidated Financial Statements — (Continued)
December 31, 2013, 2012 and 2011
II - 14
years ended December 31, 2012 and 2011 and (ii) the reclassification of premiums paid on debt redemptions from net cash provided
by operating activities to net cash used in financing activities in the statements of cash flows for the years ended December 31,
2012 and 2011.
Retrospective Restatement. During the first quarter of 2013 and subsequent to the initial filing of our Annual Report on Form
10-K/A for the year ended December 31, 2012, we discovered that the reported amount of deferred income tax assets as of December
31, 2012 and the reported income tax benefit for the year ended December 31, 2012 were understated by £60.8 million. This
understatement was principally caused by an error in the calculation of our deferred tax assets relating to arrangements that we
account for as capital leases.
We determined that the understatement was not material to the consolidated financial statements as of and for the year ended
December 31, 2012. However, if the adjustments to correct the understatement of our deferred income tax assets had been recorded
in the three months ended March 31, 2013, we believe the impact would have been significant to that period. Therefore, we
determined that it was appropriate to correct the error to the consolidated financial statements as of and for the year ended December
31, 2012 by correcting the comparative 2012 periods in the consolidated financial statements as of and for the year ending December
31, 2013, beginning with the condensed consolidated financial statements for the three months ended March 31, 2013.
The December 31, 2012 consolidated balance sheet included in this annual report reflects the correction of this understatement
by increasing the previously reported amounts of our total deferred tax assets and total shareholders’ equity by £60.8 million and
by decreasing the previously reported amount of accumulated deficit by £60.8 million. Prior to the fourth quarter of 2012, we
maintained a full valuation allowance on our deferred income tax assets. If we had not understated our deferred income tax assets
in periods prior to the fourth quarter of 2012, we would have increased the valuation allowance on those deferred income tax assets
by a corresponding amount, resulting in no net impact on the consolidated balance sheets, statements of operations or statements
of comprehensive earnings. The income tax benefit for the year ended December 31, 2012 has increased by £60.8 million from
previously reported amounts.
Principles of Consolidation
The accompanying consolidated financial statements include our accounts and the accounts of all voting interest entities where
we exercise a controlling financial interest through the ownership of a direct or indirect controlling voting interest and variable
interest entities for which our company is the primary beneficiary. All significant intercompany accounts and transactions have
been eliminated in consolidation.
Cash and Cash Equivalents and Restricted Cash
Cash equivalents consist of money market funds and other investments that are readily convertible into cash and have maturities
of three months or less at the time of acquisition. We record money market funds at the net asset value reported by the investment
manager as there are no restrictions on our ability, contractual or otherwise, to redeem our investments at the stated net asset value
reported by the investment manager.
Restricted cash consists of cash held in restricted accounts, including cash held as collateral for debt and other compensating
balances. Restricted cash amounts that are required to be used to purchase long-term assets or repay long-term debt are classified
as long-term assets. All other cash that is restricted to a specific use is classified as current or long-term based on the expected
timing of the disbursement. At December 31, 2013 and 2012, our aggregate current and long-term restricted cash balances
aggregated £1.5 million and £1.9 million, respectively.
Our significant non-cash investing and financing activities are disclosed in our consolidated statements of equity and in notes
3, 6, and 7.
Trade Receivables
Our trade receivables are reported net of an allowance for doubtful accounts. Such allowance aggregated £13.1 million and
£9.0 million at December 31, 2013 and 2012, respectively. The allowance for doubtful accounts is based upon our assessment of
probable loss related to uncollectible accounts receivable. We use a number of factors in determining the allowance, including,