Time Magazine 2014 Annual Report Download - page 99

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TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Capital Leases
The Company has entered into various leases primarily related to network equipment that qualify as capital lease
obligations. As a result, the present value of the remaining future minimum lease payments is recorded as a capitalized lease
asset and related capital lease obligation in the Consolidated Balance Sheet. Assets recorded under capital lease obligations
totaled $113 million and $115 million as of December 31, 2014 and 2013, respectively. Related accumulated amortization
totaled $69 million and $59 million as of December 31, 2014 and 2013, respectively.
Future minimum capital lease payments at December 31, 2014 are as follows (millions):
2015 ................................................................................ $ 13
2016 ................................................................................ 11
2017 ................................................................................ 9
2018 ................................................................................ 9
2019 ................................................................................ 8
Thereafter ............................................................................ 12
Total ................................................................................ 62
Amount representing interest ............................................................. (10)
Present value of minimum lease payments .................................................. 52
Current portion ........................................................................ (10)
Total long-term portion ................................................................. $ 42
Film Tax-Advantaged Arrangements
The Company’s film and TV production businesses, on occasion, enter 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 special purpose entities (“SPEs”) owned by the
foreign investors. The Company maintains its rights and control over the use of its film product. The Company evaluates
these SPEs for consolidation in accordance with its policy. Because the Company generally does not have a controlling
interest in the SPEs, it generally does not consolidate them. 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, and 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 and television production costs
resulting in lower film and television production cost amortization for the films involved in the arrangement. At
December 31, 2014, such SPEs were capitalized with approximately $2.9 billion of debt and equity from the third-party
investors. These transactions resulted in reductions of film and television production cost amortization totaling $1 million, $1
million and $10 million during the years ended December 31, 2014, 2013 and 2012, respectively.
83