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TIME WARNER INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)
exchange contracts, unrealized gains or losses largely would be offset by corresponding decreases or increases, respectively,
in the dollar value of future foreign currency royalty and license fee payments. See Note 7, “Derivative Instruments,” to the
accompanying consolidated financial statements for additional information.
Equity Risk
The Company is exposed to market risk as it relates to changes in the market value of its investments. The Company
invests in equity instruments of public and private companies for operational and strategic business purposes. These
securities are subject to significant fluctuations in fair market value due to the volatility of the stock markets and the
industries in which the companies operate. At December 31, 2014 and 2013, these securities, which are classified in
Investments, including available-for-sale securities in the accompanying Consolidated Balance Sheet, included $898 million
and $936 million, respectively, of investments accounted for using the equity method of accounting, $263 million and
$332 million, respectively, of cost-method investments, $605 million and $645 million, respectively, of investments related
to the Company’s deferred compensation program, $79 million and $96 million, respectively, of investments in available-for-
sale securities and $242 million and $0, respectively, of investments in warrants to purchase common stock of CME.
The potential loss in fair value resulting from a 10% adverse change in the prices of the Company’s equity-method
investments, cost-method investments, available-for-sale securities and investments in warrants would be approximately $150
million. The potential loss in fair value resulting from a 10% adverse change in the prices of certain of the Company’s deferred
compensation investments accounted for as trading securities would be approximately $25 million. While Time Warner has
recognized all declines that are believed to be other-than-temporary, it is reasonably possible that individual investments in the
Company’s portfolio may experience an other-than-temporary decline in value in the future if the underlying investee company
experiences poor operating results or the U.S. or certain foreign equity markets experience declines in value.
CRITICAL ACCOUNTING POLICIES
The Company’s consolidated financial statements are prepared in accordance with U.S. GAAP, which requires
management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Management considers an accounting policy to be critical if it is important to the
Company’s financial condition and results of operations and if it requires significant judgment and estimates on the part of
management in its application. The development and selection of these critical accounting policies have been determined by
the management of Time Warner, and the related disclosures have been reviewed with the Audit and Finance Committee of
the Board of Directors of the Company. The Company considers policies relating to the following matters to be critical
accounting policies:
• Impairment of Goodwill and Intangible Assets;
• Film and Television Production Cost Recognition, Participations and Residuals and Impairments;
• Gross versus Net Revenue Recognition;
• Sales Returns and Pricing Rebates; and
• Income Taxes.
For a discussion of each of the Company’s critical accounting policies, including information and analysis of estimates
and assumptions involved in their application, and other significant accounting policies, see Note 1, “Description of
Business, Basis of Presentation and Summary of Significant Accounting Policies,” to the accompanying consolidated
financial statements.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This 2014 Annual Report to Shareholders contains “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to
historical or current facts. Forward-looking statements often include words such as “anticipates,” “estimates,” “expects,”
“projects,” “intends,” “plans,” “believes” and words and terms of similar substance in connection with discussions of future
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