Time Magazine 2009 Annual Report Download - page 84

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equity as a component of Accumulated other comprehensive income, net, until the hedged item is recognized in
earnings, depending on whether the derivative is being used to hedge changes in fair value or cash flows. The
ineffective portion of a derivative’s change in fair value is immediately recognized in earnings. For those derivative
instruments that do not qualify for hedge accounting, changes in the fair value are recognized immediately in
earnings. The Company uses derivative instruments principally to manage the risk associated with movements in
foreign currency exchange rates and the risk that changes in interest rates will affect the fair value or cash flows of
its debt obligations. At December 31, 2009, there were no interest rate swaps or other similar derivative financial
instruments outstanding. See Note 13 for additional information regarding derivative instruments held by the
Company and risk management strategies.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Additions to property, plant and equipment generally include
material, labor and overhead. Time Warner also capitalizes certain costs associated with coding, software
configuration, upgrades and enhancements incurred for the development of internal use software. Depreciation,
which includes amortization of capital leases, is provided generally on a straight-line basis over estimated useful
lives. Time Warner evaluates the depreciation periods of property, plant and equipment to determine whether events
or circumstances warrant revised estimates of useful lives. Property, plant and equipment, including capital leases,
consist of (millions):
2009 2008
Estimated
Useful Lives
December 31,
(recast)
Land and buildings
(a)
............................. $ 2,996 $ 2,944 7 to 30 years
Capitalized software costs . ........................ 1,447 1,229 3 to 7 years
Furniture, fixtures and other equipment ................ 3,341 3,366 3 to 10 years
7,784 7,539
Less accumulated depreciation ...................... (3,821) (3,434)
Total ......................................... $ 3,963 $ 4,105
(a)
Land and buildings include $478 million and $477 million related to land as of December 31, 2009 and 2008, respectively, which is not
depreciated.
Intangible Assets
As a creator and distributor of branded information and copyrighted entertainment products, Time Warner has a
significant number of intangible assets, including acquired film and television libraries and other copyrighted
products and trademarks. Time Warner does not recognize the fair value of internally generated intangible assets.
Costs incurred to create and produce copyrighted product, such as feature films and television series, generally are
either expensed as incurred or capitalized as tangible assets, as in the case of cash advances and inventoriable
product costs. Intangible assets acquired in business combinations are recorded at fair value in the Company’s
consolidated balance sheet. For more information, see Note 2.
Asset Impairments
Investments
The Company’s investments consist of fair-value investments, including available-for-sale investments,
investments accounted for using the cost method of accounting and investments accounted for using the equity
method of accounting. The Company regularly reviews its investment securities for impairment, including when the
carrying value of an investment exceeds its related market value. If it has been determined that an investment has
sustained an other-than-temporary decline in its value, the investment is written down to its fair value by a charge to
72
TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)