Time Magazine 2013 Annual Report Download - page 81

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TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Derivative Instruments
The Company uses derivative instruments principally to manage the risk associated with movements in
foreign currency exchange rates, and recognizes all derivative instruments on the Consolidated Balance Sheet at
fair value. Changes in fair value of derivative instruments that qualify for hedge accounting will either be offset
against the change in fair value of the hedged assets, liabilities or firm commitments through earnings or
recognized in shareholders’ equity as a component of Accumulated other comprehensive loss, net, until the
hedged item is recognized in earnings, depending on whether the derivative instrument is being used to hedge
changes in fair value or cash flows. For qualifying hedge relationships, the Company excludes the impact of
forward points from its assessment of hedge effectiveness. The ineffective portion of a derivative instrument’s
change in fair value is immediately recognized in earnings. For those derivative instruments that do not qualify
for hedge accounting, changes in fair value are recognized immediately in earnings. See Note 7 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 is
recorded on a straight-line basis over estimated useful lives. Leasehold improvements are depreciated over the
lesser of the estimated useful life of the improvement or the term of the applicable lease. Time Warner
periodically evaluates the depreciation periods of property, plant and equipment to determine whether a revision
to its estimates of useful lives is warranted. Property, plant and equipment, including capital leases, consist of
(millions):
December 31, Estimated
Useful Lives2013 2012
Land(a) ............................................ $ 506 $ 505
Buildings and improvements .......................... 2,918 2,851 7 to 30 years
Capitalized software costs ............................. 1,990 1,869 3 to 7 years
Furniture, fixtures and other equipment(b) ................. 3,600 3,541 3 to 10 years
9,014 8,766
Less accumulated depreciation ......................... (5,189) (4,824)
Total ............................................. $ 3,825 $ 3,942
(a) Land is not depreciated.
(b) Includes $339 million and $396 million of construction in progress as of December 31, 2013 and 2012, respectively.
Intangible Assets
Time Warner has a significant number of intangible assets, including acquired film and television libraries
and other copyrighted products and tradenames. Time Warner does not recognize the fair value of internally
generated intangible assets. Intangible assets acquired in business combinations are recorded at the acquisition
date fair value in the Company’s Consolidated Balance Sheet. Acquired film libraries are amortized using the
film forecast computation model. For more information, see Note 2.
Asset Impairments
Investments
The Company’s investments consist of (i) investments carried at fair value, including available-for-sale
securities and certain deferred compensation-related investments, (ii) investments accounted for using the cost
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