Comcast 2010 Annual Report Download - page 72

Table of Contents
63
Comcast 2010 Annual Report on Form 10-
K
value. Unless presented separately, the impairment charge is
included as a component of amortization expense.
Other Intangibles
Other intangible assets consist primarily of customer
relationships acquired in business combinations,
programming distribution rights, software, cable franchise
renewal costs, and programming agreements and rights.
These assets are amortized primarily on a straight-line basis
over the estimated useful life or the term of the related
agreements. See Note 8 for the ranges of useful lives of our
intangible assets.
Programming Distribution Rights
Our Programming subsidiaries enter into multiyear license
agreements with various multichannel video providers for
distribution of our networks’ programming (“programming
distribution rights”). We capitalize amounts paid to secure or
extend these programming distribution rights and include
them within other intangible assets. We amortize these
programming distribution rights on a straight-line basis over
the term of the related license agreements. We classify the
amortization of these programming distribution rights as a
reduction to revenue unless the Programming subsidiary
receives, or will receive, an identifiable benefit from the
distributor separate from the fee paid for the programming
distribution right, in which case we recognize the fair value of
the identified benefit in the period in which it is received.
Software
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 also capitalize
costs associated with the purchase of software licenses. We
include these costs within other intangible assets and
amortize them on a straight-line basis over a period not to
exceed 5 years, beginning when the asset is substantially
ready for use. We expense maintenance and training costs,
as well as costs incurred during the preliminary stage of a
project, as they are incurred. We capitalize initial operating
system software costs and amortize them over the life of the
associated hardware.
* * *
We periodically evaluate the recoverability of our intangible
assets subject to amortization whenever events or
substantive changes in circumstances indicate that the
carrying amount may not be recoverable or the useful life has
changed. The evaluation is based on the cash flows
generated by the underlying assets and profitability
information, including estimated future operating results,
trends or other determinants of fair value. If the total of the
expected future undiscounted cash flows is less than the
carrying amount of the asset, we would recognize an
impairment charge for the difference between the estimated
fair value and the carrying value of the asset. Unless
presented separately, the impairment charge is included as a
component of amortization expense.
Asset Retirement Obligations
We recognize a liability for an asset retirement obligation in
the period in which it is incurred if a reasonable estimate of
fair value can be made.
Certain of our cable franchise agreements and lease
agreements contain provisions requiring us to restore
facilities or remove property in the event that the franchise or
lease agreement is not renewed. We expect to continually
renew our cable franchise agreements and therefore cannot
estimate any liabilities associated with such agreements. A
remote possibility exists that franchise agreements could be
terminated unexpectedly, which could result in us incurring
significant expense in complying with restoration or removal
provisions. The disposal obligations related to our properties
are not material to our consolidated financial statements. We
do not have any significant asset retirement-related liabilities
recorded in our consolidated financial statements.
Revenue Recognition
Cable Segment
Our Cable segment generates revenue primarily from
subscriptions to our video, high-speed Internet and phone
services (“cable services”) and from the sale of advertising.
We recognize revenue from cable services as each service is
provided. We manage credit risk by screening applicants
through the use of internal customer information,
identification verification tools and credit bureau data. If a
customer’s account is delinquent, various measures are used
to collect outstanding amounts, including termination of the
customer’s cable service. Since installation revenue obtained
from the connection of customers to our cable systems is
less than related direct selling costs, we recognize revenue
as connections are completed.
As part of our programming license agreements with
programming networks, we generally receive an allocation of
scheduled advertising time that we may sell to local, regional
and national advertisers. We recognize advertising revenue
when the advertising is aired and based on the broadcast
calendar. In most cases, the available advertising time is sold
by our sales force. In some cases, we work with
representation firms as an extension of our sales force to sell
a portion of the advertising time. We also coordinate the
advertising sales efforts of other cable operators in some
markets, and in some markets we operate advertising
interconnects. These interconnects establish a physical,
direct link among multiple providers for the sale of regional
and national advertising across larger geographic areas than
could be provided by a single cable operator. Since we are
acting as the principal in these arrangements, we report the
fees paid to representation firms and multichannel video
providers as an operating expense.
Revenue earned from other sources is recognized when
services are provided or events occur. Under the terms of our
cable franchise agreements, we are generally required to pay
to the local