Time Warner Cable 2006 Annual Report Download - page 130

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carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss
is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner
as the amount of goodwill recognized in a business combination. In other words, the fair value of the reporting unit
is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the
reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase
price paid to acquire the reporting unit.
The impairment test for other intangible assets not subject to amortization consists of a comparison of the fair
value of the intangible asset with its carrying value. The Company has identified six units of accounting based upon
geographic locations of its systems in performing its testing. If the carrying value of the intangible asset exceeds its
fair value, an impairment loss is recognized in an amount equal to that excess. The estimates of fair value of
intangible assets not subject to amortization are determined using various discounted cash flow valuation
methodologies. The methodology used to value the cable franchises entails identifying the projected discrete
cash flows related to such franchises and discounting them back to the valuation date. Significant assumptions
inherent in the methodologies employed include estimates of discount rates. Discount rate assumptions are based on
an assessment of the risk inherent in the respective intangible assets.
The Company’s 2006 annual impairment analysis, which was performed during the fourth quarter, did not
result in an impairment charge. Other intangible assets not subject to amortization are tested for impairment
annually, or more frequently if events or circumstances indicate that the asset might be impaired.
A summary of changes in the Company’s goodwill during the year ended December 31, 2006 is as follows (in
millions):
Balance at December 31, 2005 .............................................. $1,769
Acquisitions and dispositions
(a)
.............................................. 312
Other ................................................................. (22)
Balance at December 31, 2006 .............................................. $2,059
(a)
Includes goodwill recorded as a result of the preliminary purchase price allocation for the Adelphia Acquisition and the Exchange of
$1.050 billion, partially offset by a $738 million adjustment to goodwill related to the excess of the carrying value of the Comcast
minority interests in TWC and TWE acquired over the total fair value of the Redemptions. Of the $738 million adjustment to
goodwill, approximately $719 million is associated with the TWC Redemption and approximately $19 million is associated with the
TWE Redemption. Refer to Note 5 for additional information regarding the Transactions.
125
TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)