Time Magazine 2010 Annual Report Download - page 79

are made widely available for sale or rental by retailers based on gross sales less a provision for estimated returns.
Revenues from the distribution of theatrical product to television sectors are recognized when the films are available
to telecast.
Television films and series are initially produced for broadcast networks, cable networks or first-run television
syndication and may be subsequently licensed to foreign or domestic cable and syndicated television sectors, as
well as sold on home video. Revenues from the distribution of television programming are recognized when the
films or series are available to telecast, except for advertising barter agreements, where the revenue is valued and
recognized when the related advertisements are exhibited. In certain circumstances, pursuant to the terms of the
applicable contractual arrangements, the availability dates granted to customers may precede the date the Company
may bill the customers for these sales. Unbilled accounts receivable, which primarily relate to the distribution of
television product, totaled $2.339 billion and $2.105 billion at December 31, 2010 and December 31, 2009,
respectively. Included in the unbilled accounts receivable at December 31, 2010 was $1.462 billion that is to be
billed in the next twelve months. Similar to theatrical home video sales, revenue from home video sales of television
films and series, less a provision for estimated returns, is recognized at the later of the delivery date or the date that
video units are made widely available for sale or rental by retailers.
Upfront or guaranteed payments for the licensing of intellectual property are recognized as revenue when (i) an
arrangement has been signed with a customer, (ii) the customer’s right to use or otherwise exploit the intellectual
property has commenced and there is no requirement for significant continued performance by the Company,
(iii) licensing fees are either fixed or determinable and (iv) collectability of the fees is reasonably assured. In the
event any significant continued performance is required in these arrangements, revenue is recognized when the
related services are performed.
Film costs include the unamortized cost of completed theatrical films and television episodes, theatrical films
and television series in production and film rights in preparation of development. Film costs are stated at the lower
of cost, less accumulated amortization, or fair value. The amount of capitalized film costs recognized as cost of
revenues for a given film as it is exhibited in various sectors, throughout its life cycle, is determined using the film
forecast computation method. Under this method, the amortization of capitalized costs and the accrual of
participations and residuals is based on the proportion of the film’s revenues recognized for such period to the
film’s estimated remaining ultimate revenues. The process of estimating a film’s ultimate revenues (i.e., the total
revenue to be received throughout a film’s life cycle) is discussed further under “Film Cost Recognition and
Impairments.”
Inventories of theatrical and television product consist primarily of DVDs and are stated at the lower of cost or
net realizable value. Cost is determined using the average cost method. Returned goods included in inventory are
valued at estimated realizable value, but not in excess of cost. For more information, see Note 6.
The Company enters into collaborative arrangements primarily related to arrangements with third parties to
jointly finance and distribute many of its theatrical productions. See “Accounting for Collaborative Arrangements”
for more information.
Acquired film libraries (i.e., program rights and product that are acquired after a film has been exhibited at least
once in all sectors) are amortized using the film forecast computation method. For more information, see Note 2.
Publishing
Magazine Subscription and Advertising revenues are recognized at the magazine cover date. The unearned
portion of magazine subscriptions is deferred until the magazine cover date, at which time a proportionate share of
the gross subscription price is included in revenues, net of any commissions paid to subscription agents. Also
included in Subscription revenues are revenues generated from single-copy sales of magazines through retail outlets
such as newsstands, supermarkets, convenience stores and drugstores, which may or may not result in future
subscription sales. Advertising revenues from websites are recognized as the services are performed.
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TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)