Time Magazine 2010 Annual Report Download - page 96

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Future minimum capital lease payments at December 31, 2010 are as follows (millions):
2011 ................................................................. $ 14
2012 ................................................................. 13
2013 ................................................................. 14
2014 ................................................................. 12
2015 ................................................................. 10
Thereafter ............................................................. 32
Total ................................................................. 95
Amount representing interest ............................................... (20)
Present value of minimum lease payments ..................................... 75
Current portion ......................................................... (10)
Total long-term portion ................................................... $ 65
Film Tax-Advantaged Arrangements
The Company’s filmed entertainment business, on occasion, enters into tax-advantaged transactions with
foreign investors that are thought to generate tax benefits for such investors. The Company believes that its tax
profile is not affected by its participation in these arrangements in any jurisdiction. The foreign investors provide
consideration to the Company for entering into these arrangements.
Although these transactions often differ in form, they generally involve circumstances in which the Company
enters into a sale-leaseback arrangement involving its film product with third-party SPEs owned by the foreign
investors. The Company maintains its rights and control over the use of its film product. The Company does not
have a controlling financial interest in, and accordingly does not consolidate, these SPEs. In addition, the Company
does not guarantee and is not otherwise responsible for the equity and debt in these SPEs and does not participate in
the profits or losses of these SPEs. The Company accounts for these arrangements based on their substance. That is,
the Company records the costs of producing the films as an asset and records the net benefit received from the
investors as a reduction of film costs resulting in lower film cost amortization for the films involved in the
arrangement. At December 31, 2010, such SPEs were capitalized with approximately $3.2 billion of debt and equity
from the third-party investors. These transactions resulted in reductions of film cost amortization totaling
$7 million, $14 million and $43 million during the years ended December 31, 2010, 2009 and 2008, respectively.
9. INCOME TAXES
Domestic and foreign income before income taxes, discontinued operations and cumulative effect of
accounting change are as follows (millions):
2010 2009 2008
Years Ended December 31,
Domestic ........................................ $ 3,575 $ 3,235 $ (4,622)
Foreign.......................................... 344 2 225
Total .......................................... $ 3,919 $ 3,237 $ (4,397)
84
TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)