Comcast 2006 Annual Report Download - page 46

Notes to Consolidated Financial Statements Comcast 2006 Annual Report 44
gains or losses resulting from changes in fair value between mea-
surement dates as a component of investment income (loss), net.
We recognize realized gains and losses associated with our fair
value method investments using the specific identification method.
We use the equity method to account for investments in which we
have the ability to exercise significant influence over the investee’s
operating and financial policies. Equity method investments are
recorded at original cost and adjusted to recognize our propor-
tionate share of the investee’s net income or losses after the date
of investment, amortization of basis differences, additional contri-
butions made and dividends received, and impairment charges
resulting from adjustments to fair value. We generally record our
share of the investee’s net income or loss one quarter in arrears
due to the timing of our receipt of such information.
If a consolidated subsidiary or equity method investee issues addi-
tional securities that change our proportionate share of the entity,
we recognize the change as a gain or loss in our consolidated
statement of operations. In cases where gain realization is not
assured, we record the gain to additional capital.
Restricted publicly traded investments and investments in privately
held companies are stated at cost and adjusted for any known
decrease in value (see Note 6).
Property and Equipment
Property and equipment are stated at cost. We capitalize improve-
ments that extend asset lives and expense other repairs and
maintenance charges as incurred. For assets that are sold or retired,
we remove the applicable cost and accumulated depreciation and,
unless the gain or loss on disposition is presented separately, we
recognize it as a component of depreciation expense.
We capitalize the costs associated with the construction of our
cable transmission and distribution facilities and new service instal-
lations. Costs include all direct labor and materials, as well as
various indirect costs.
We record depreciation using the straight-line method over esti-
mated useful lives. Our significant components of property and
equipment are as follows:
December 31 (in millions) Useful Life 2006 2005
Cable transmission and
distribution facilities 2 –15 years $ 31,870 $ 25,737
Buildings and building
improvements 5 – 40 years 1,366 1,279
Land — 163 148
Other 3 –10 years 3,355 2,619
Property and equipment, at cost 36,754 29,783
Less: accumulated depreciation (15,506) (12,079)
Property and equipment, net $ 21,248 $ 17,704
Intangible Assets
Cable franchise rights represent the value attributed to agreements
with local authorities that allow access to homes in cable service
areas acquired in connection with business combinations. We do
not amortize cable franchise rights because we have determined
that they have an indefinite life. We reassess this determination
periodically for each franchise based on the factors included in
Statement of Financial Accounting Standards No. 142, “Goodwill
and Other Intangible Assets” (“SFAS No. 142”). Costs we incur in
negotiating and renewing cable franchise agreements are included
in other intangible assets and are principally amortized on a straight-
line basis over the term of the franchise renewal period.
Other intangible assets consist principally of franchise-related cus-
tomer relationships acquired in business combinations, cable and
satellite television distribution rights, cable franchise renewal costs,
contractual operating rights, computer software, programming
agreements and rights, patents and other technology rights, and
noncompetition agreements. We record these costs as assets and
amortize them on a straight-line basis over the term of the related
agreements or estimated useful life.
Our Programming subsidiaries enter into multi-year license agree-
ments with various cable and satellite distributors for distribution of
their respective programming (“distribution rights”). We capitalize
distribution rights and amortize them on a straight-line basis over
the term of the related license agreements. We classify the amorti-
zation of these distribution rights as a reduction of revenue unless
the Programming subsidiary receives, or will receive, an identifiable
benefit from the cable or satellite system distributor separate from
the fee paid for the distribution right, in which case we recognize
the fair value of the identified benefit as an operating expense in the
period in which it is received.
We capitalize direct development costs associated with internal-use
software, including external direct costs of material and services,
and payroll costs for employees devoting time to these software
projects. We include these costs within other intangible assets and
amortize them over a period not to exceed five years, beginning
when the asset is substantially ready for use. We expense main-
tenance and training costs, as well as costs incurred during the
preliminary project stage, as they are incurred. We capitalize initial
operating system software costs and amortize them over the life of
the associated hardware.
See Note 7 for the ranges of useful lives of our intangible assets.
Asset Impairments
Property and Equipment and Intangible Assets Subject
to Amortization
We periodically evaluate the recoverability and estimated lives
of our property and equipment and intangible assets subject to
amortization in accordance with SFAS No. 144, “Accounting for the