Time Magazine 2013 Annual Report Download - page 102

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TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
6. INVENTORIES AND THEATRICAL FILM AND TELEVISION PRODUCTION COSTS
Inventories and theatrical film and television production costs consist of (millions):
December 31,
2013
December 31,
2012
Inventories:
Programming costs, less amortization ............................. $ 3,738 $ 3,817
DVDs, Blu-ray Discs, books, paper and other merchandise ............ 325 326
Total inventories ............................................. 4,063 4,143
Less: current portion of inventory ................................ (2,028) (2,036)
Total noncurrent inventories .................................... 2,035 2,107
Theatrical film production costs:(a)
Released, less amortization ..................................... 500 597
Completed and not released ..................................... 246 174
In production ................................................ 1,480 1,770
Development and pre-production ................................ 107 106
Television production costs:(a)
Released, less amortization ..................................... 1,094 1,034
Completed and not released ..................................... 536 396
In production ................................................ 694 487
Development and pre-production ................................ 7 4
Total theatrical film and television production costs ................. 4,664 4,568
Total noncurrent inventories and theatrical film and television production
costs ..................................................... $ 6,699 $ 6,675
(a) Does not include $958 million and $1.107 billion of acquired film library intangible assets as of December 31, 2013 and December 31,
2012, respectively, which are included in Intangible assets subject to amortization, net in the Consolidated Balance Sheet.
Approximately 92% of unamortized film costs for released theatrical and television product are expected to
be amortized within three years from December 31, 2013. In addition, approximately $1.7 billion or 72% of the
film costs of released and completed and not released theatrical and television product are expected to be
amortized during the twelve-month period ending December 31, 2014.
7. DERIVATIVE INSTRUMENTS
Time Warner uses derivative instruments, principally forward contracts, to manage the risk associated with
the volatility of future cash flows denominated in foreign currencies and changes in fair value resulting from
changes in foreign currency exchange rates. The principal currencies being hedged include the British Pound,
Euro, Australian Dollar and Canadian Dollar. Time Warner uses foreign exchange contracts that generally have
maturities of three to 18 months to hedge various foreign exchange exposures, including the following:
(i) variability in foreign-currency-denominated cash flows, such as the hedges of unremitted or forecasted royalty
and license fees owed to Time Warner’s domestic companies for the sale or anticipated sale of U.S. copyrighted
products abroad or cash flows for certain film production costs denominated in a foreign currency (i.e., cash flow
hedges) and (ii) currency risk associated with foreign-currency-denominated operating assets and liabilities (i.e.,
fair value hedges). For these qualifying hedge relationships, the Company excludes the impact of forward points
from its assessment of hedge effectiveness. As a result, changes in the fair value due to forward points are
recorded in Other loss, net in the Consolidated Statement of Operations each quarter.
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