Comcast 2012 Annual Report Download - page 71

Table of Contents
critical in the preparation of our consolidated financial statements. Management has discussed the development and selection of
these critical accounting judgments and estimates with the Audit Committee of our Board of Directors, and the Audit Committee has
reviewed our disclosures relating to them, which are presented below. See Notes 8, 5 and 15 to our consolidated financial
statements, respectively, for a discussion of our accounting policies with respect to these items.
Valuation and Impairment Testing of Cable Franchise Rights
Our largest asset, our cable franchise rights, results from agreements we have with state and local governments that allow us to
construct and operate a cable business within a specified geographic area. The value of a franchise is derived from the economic
benefits we receive from the right to solicit new customers and to market new services, such as advanced video services and high-
speed Internet and voice services, in a particular service area. The amounts we record for cable franchise rights are primarily a result
of cable system acquisitions. Typically when we acquire a cable system, the most significant asset we record is the value of the
cable franchise rights. Often these cable system acquisitions include multiple franchise areas. We currently serve approximately
6,400 franchise areas in the United States.
We have concluded that our cable franchise rights have an indefinite useful life since there are no legal, regulatory, contractual,
competitive, economic or other factors which limit the period over which these rights will contribute to our cash flows. Accordingly, we
do not amortize our cable franchise rights but assess the carrying value of our cable franchise rights annually, or more frequently
whenever events or changes in circumstances indicate that the carrying amount may exceed the fair value (
“impairment testing”
).
When performing a quantitative assessment, we estimate the fair value of our cable franchise rights primarily based on a discounted
cash flow analysis that involves significant judgment. When analyzing the fair values indicated under the discounted cash flow
models, we also consider multiples of operating income before depreciation and amortization generated by the underlying assets,
current market transactions and profitability information.
If we were to determine that the value of our cable franchise rights was less than the carrying amount, we would recognize an
impairment charge for the difference between the estimated fair value and the carrying value of the assets. For purposes of our
impairment testing, we have grouped the recorded values of our various cable franchise rights into our Cable Communications
divisions or units of account. We evaluate the unit of account periodically to ensure our impairment testing is performed at an
appropriate level.
Since the adoption of the accounting guidance related to goodwill and intangible assets in 2002, we have not recorded any
significant impairment charges to cable franchise rights as a result of our impairment testing. A future change in the unit of account
could result in the recognition of an impairment charge.
We could also record impairment charges in the future if there are changes in long-
term market conditions, in expected future
operating results, or in federal or state regulations that prevent us from recovering the carrying value of these cable franchise rights.
Assumptions made about increased competition and economic conditions could also impact the valuations used in future annual
impairment testing and result in a reduction of fair values from those determined in the July 1, 2012 annual impairment testing. The
table below illustrates the impairment related to our Cable Communications divisions that would have occurred had the hypothetical
reductions in fair value existed at the time of our last annual impairment testing.
Percent Hypothetical Reduction in Fair Value and Related Impairment
(in millions)
10%
15%
20%
25%
Northeast Division
$
—
$
—
$
(
402
)
$
(1,842
)
Central Division
—
— — —
West Division
—
—
—
—
Total
$
—
$
—
$
(
402
)
$
(1,842
)
Comcast 2012 Annual Report on Form 10-K
68