Time Magazine 2014 Annual Report Download - page 94

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TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Non-Financial Instruments
The majority of the Company’s non-financial instruments, which include goodwill, intangible assets, inventories and
property, plant and equipment, are not required to be carried at fair value on a recurring basis. However, if certain triggering
events occur (or at least annually for goodwill and indefinite-lived intangible assets), a non-financial instrument is required to
be evaluated for impairment. If the Company determines that the non-financial instrument is impaired, the Company would
be required to write down the non-financial instrument to its fair value.
During the year ended December 31, 2014, the Company performed impairment reviews of a tradename at Warner Bros.,
as well as certain intangible assets at international subsidiaries of Turner and Home Box Office. As a result, the Company
recorded noncash impairments of $17 million to write down the value of these assets to $12 million. During the year ended
December 31, 2013, the Company performed impairment reviews of certain intangible assets at international subsidiaries of
Turner. As a result, the Company recorded noncash impairments of $18 million to write down the value of these assets to $3
million. These fair value measurements were considered to be Level 3 measurements and were determined using a
discounted cash flow (“DCF”) methodology with assumptions for cash flows associated with the use and eventual disposition
of the assets.
During the years ended December 31, 2014 and December 31, 2013, the Company also made fair value measurements
related to certain theatrical films and television programs. In determining the fair value of its theatrical films, the Company
employs a DCF methodology that includes cash flow estimates of a film’s ultimate revenue and costs as well as a discount
rate. The discount rate utilized in the DCF analysis is based on the weighted average cost of capital of the respective business
(e.g., Warner Bros.) plus a risk premium representing the risk associated with producing a particular theatrical film. The fair
value of any theatrical film and television production that management plans to abandon is zero. As the primary
determination of fair value is determined using a DCF model, the resulting fair value is considered a Level 3 measurement.
The following table presents certain theatrical film and television production costs, which were recorded as inventory in the
Consolidated Balance Sheet, that were written down to fair value (millions):
Carrying value
before write down
Carrying value
after write down
Fair value measurements made during the year ended December 31,:
2014 ............................................................. $ 331 $ 201
2013 ............................................................. 289 206
78