Time Magazine 2009 Annual Report Download - page 71

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purposes. These securities are subject to significant fluctuations in fair market value due to the volatility of the stock
market and the industries in which the companies operate. During 2009, the Company recorded $73 million of
impairments related to equity instruments. At December 31, 2009, these securities, which are classified in
Investments, including available-for-sale securities in the accompanying consolidated balance sheet, included
$280 million of investments accounted for using the equity method of accounting, $323 million of cost-method
investments, primarily relating to equity interests in privately held businesses, and $578 million of fair value
investments, including $544 million of investments related to the Company’s deferred compensation program,
$33 million of investments in unrestricted public equity securities held for purposes other than trading and
$1 million of equity derivative instruments.
The potential loss in fair value resulting from a 10% adverse change in the prices of the Company’s
available-for-sale securities and equity derivative instruments would be approximately $3 million. While Time
Warner has recognized all declines that are believed to be other-than-temporary, it is reasonably possible that
individual investments in the Company’s portfolio may experience an other-than-temporary decline in value in the
future if the underlying investee company experiences poor operating results or if the U.S. equity markets
experience future broad declines in value. See Note 4 to the accompanying consolidated financial statements for
additional discussion.
CRITICAL ACCOUNTING POLICIES
The Company’s consolidated financial statements are prepared in accordance with GAAP, which requires
management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Management considers an accounting policy to be critical if it is
important to the Company’s financial condition and results of operations, and if it requires significant judgment and
estimates on the part of management in its application. The development and selection of these critical accounting
policies have been determined by the management of Time Warner and the related disclosures have been reviewed
with the Audit and Finance Committee of the Board of Directors. The Company considers policies relating to the
following matters to be critical accounting policies:
• Impairment of Goodwill and Identifiable Intangible Assets;
• Multiple-Element Transactions;
• Income Taxes;
• Film Cost Recognition and Impairments;
• Gross versus Net Revenue Recognition; and
• Sales Returns, Pricing Rebates and Uncollectible Accounts.
For a discussion of each of the Company’s critical accounting policies, including information and analysis of
estimates and assumptions involved in their application, and other significant accounting policies, see Note 1 to the
accompanying consolidated financial statements.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This document contains “forward-looking statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or
current facts. Forward-looking statements often include words such as “anticipates,” “estimates,” “expects,”
“projects,” “intends,” “plans,” “believes” and words and terms of similar substance in connection with
discussions of future operating or financial performance. Examples of forward-looking statements in this
document include, but are not limited to, statements regarding the adequacy of the Company’s liquidity to
meet its needs for the foreseeable future, the incurrence of additional restructuring charges in 2010, pension
expenses in 2010, capital spending in 2010 and beyond, contributions to benefit plans in 2010, the Company’s
international expansion plans and changes to existing reserves related to uncertain tax positions.
The Company’s forward-looking statements are based on management’s current expectations and assumptions
regarding the Company’s business and performance, the economy and other future conditions and forecasts of
59
TIME WARNER INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)