Time Magazine 2009 Annual Report Download - page 78

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With the completion of the TWC Separation, the Company disposed of its Cable segment in its entirety.
Accordingly, the Company has presented the financial condition and results of operations of its former Cable
segment as discontinued operations in the consolidated financial statements for all periods presented. For a
summary of discontinued operations, see Note 3.
Noncontrolling Interests
On January 1, 2009, the Company adopted accounting guidance for noncontrolling interests in a consolidated
subsidiary, including the accounting treatment applicable upon the deconsolidation of a subsidiary. This guidance is
being applied prospectively, except for the provisions related to the presentation of noncontrolling interests, which
are being applied retrospectively. As of December 31, 2009 and December 31, 2008, noncontrolling interests of
$343 million and $3.382 billion, respectively, have been classified as a component of equity in the consolidated
balance sheet. For the years ended December 31, 2009, 2008, and 2007, net income (loss) attributable to
noncontrolling interests of $49 million, $(1.246 billion) and $240 million, respectively, are included in net
income (loss) in the consolidated statement of operations. The Company’s adoption of this guidance did not affect
earnings per share amounts in prior periods.
Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating
Securities
On January 1, 2009, the Company adopted, on a retrospective basis, accounting guidance which requires that all
outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends or dividend
equivalents (such as restricted stock units granted by the Company) be considered participating securities. Because
the awards are participating securities, the Company is required to apply the two-class method of computing basic
and diluted earnings per share (the “Two-Class Method”). The Company’s adoption of this guidance did not affect
earnings per share amounts in prior periods.
Basis of Presentation
Basis of Consolidation
The consolidated financial statements include 100% of the assets, liabilities, revenues, expenses and cash flows
of Time Warner and all voting interest entities in which Time Warner has a controlling voting interest
(“subsidiaries”). Intercompany accounts and transactions between consolidated companies have been
eliminated in consolidation. In addition, an entity in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties is referred to as a variable interest entity (“VIE”). The
primary beneficiary of a VIE is the party that absorbs the majority of the entity’s expected losses, receives the
majority of its expected residual returns, or both, as a result of holding variable interests. As such, the Company
consolidates those VIEs of which it is the primary beneficiary.
The financial position and operating results of substantially all foreign operations are consolidated using the
local currency as the functional currency. Local currency assets and liabilities are translated at the rates of exchange
on the balance sheet date, and local currency revenues and expenses are translated at average rates of exchange
during the period. Translation gains or losses of assets and liabilities are included in the consolidated statement of
shareholders’ equity as a component of accumulated other comprehensive income, net.
Variable Interest Entities
As of December 31, 2009, the Company’s investments in entities determined to be VIEs principally consisted of
certain investments at its Networks segment, primarily HBO Asia, HBO South Asia and HBO Latin America Group
(“HBO LAG”), which are multi-channel pay-television programming services. The Company provides
programming as well as certain services, including distribution, licensing, technological and administrative
66
TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)