Cablevision 2012 Annual Report Download - page 98

(92)
and Other (Topic 350): Testing Goodwill for Impairment, ASU No. 2012-02 provides entities the option
to use a qualitative approach to assess the impairment of an indefinite-lived intangible asset. A company
will not be required to calculate the fair value of an indefinite-lived intangible asset unless it concludes,
based on the qualitative assessment, that it is more likely than not that the fair value of that asset is less
than its book value. Additional disclosure requirements are not necessary relating to the use of the
optional qualitative assessment. ASU No. 2012-02 will be effective for us on January 1, 2013 and we
will adopt this guidance in connection with our annual impairment test to be performed in the first quarter
of 2013.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
All dollar amounts, except per customer, per unit and per share data, included in the following discussion
under this Item 7A are presented in thousands.
Equity Price Risk
We are exposed to market risks from changes in certain equity security prices. Our exposure to changes
in equity security prices stems primarily from the shares of Comcast Corporation common stock held by
us. We have entered into equity derivative contracts consisting of a collateralized loan and an equity
collar to hedge our equity price risk and to monetize the value of these securities. These contracts, at
maturity, are expected to offset declines in the fair value of these securities below the hedge price per
share while allowing us to retain upside appreciation from the hedge price per share to the relevant cap
price. The contracts' actual hedge prices per share vary depending on average stock prices in effect at the
time the contracts were executed. The contracts' actual cap prices vary depending on the maturity and
terms of each contract, among other factors. If any one of these contracts is terminated prior to its
scheduled maturity date due to the occurrence of an event specified in the contract, we would be obligated
to repay the fair value of the collateralized indebtedness less the sum of the fair values of the underlying
stock and equity collar, calculated at the termination date. As of December 31, 2012, we did not have an
early termination shortfall relating to these contracts.
The underlying stock and the equity collars are carried at fair value on our consolidated balance sheets
and the collateralized indebtedness is carried at its accreted value. The carrying value of our
collateralized indebtedness amounted to $556,152 at December 31, 2012. At maturity, the contracts
provide for the option to deliver cash or shares of Comcast common stock, with a value determined by
reference to the applicable stock price at maturity.
As of December 31, 2012, the fair value and the carrying value of our holdings of 21,477,618 shares of
Comcast common stock aggregated $802,834. Assuming a 10% change in price, the potential change in
the fair value of these investments would be approximately $80,283. As of December 31, 2012, the net
fair value and the carrying value of the equity collar component of the equity derivative contracts entered
into to partially hedge the equity price risk of our holdings of Comcast common stock aggregated
$145,120, a net liability position. For the year ended December 31, 2012, we recorded a net loss on our
outstanding equity derivative contracts of $211,335 and recorded unrealized gains of $293,599 on our
holdings of Comcast common stock that we held during the period.
Fair Value of Equity Derivative Contracts
Fair value as of December 31, 2011, net liability position .................................................................... $ (4,364)
Change in fair value, net ........................................................................................................................ (211,335)
Settlement of contracts .......................................................................................................................... 70,579
Fair value as of December 31, 2012, net liability position .................................................................... $(145,120)