Time Warner Cable 2007 Annual Report Download - page 89

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Discontinued Operations. As discussed more fully in Note 4, the Company has reflected the financial
position, results of operations and cash flows of the Transferred Systems (as defined in Note 4 below) as
discontinued operations for all periods presented.
Basis of Consolidation
The consolidated financial statements include 100% of the assets, liabilities, revenues, expenses and cash
flows of TWC and all entities in which TWC has a controlling voting interest, as well as allocations of certain Time
Warner corporate costs deemed reasonable by management to present the Company’s consolidated results of
operations, financial position, changes in equity and cash flows on a stand-alone basis. In accordance with Financial
Accounting Standards Board (“FASB”) Interpretation No. 46 (revised 2003), Consolidation of Variable Interest
Entities—an interpretation of ARB No. 51, the consolidated financial statements include the results of Time Warner
Entertainment-Advance/Newhouse Partnership (“TWE-A/N”) only for the systems that are controlled by TWC and
for which TWC holds an economic interest. The Time Warner corporate costs include specified administrative
services, including selected tax, human resources, legal, information technology, treasury, financial, public policy
and corporate and investor relations services, and approximate Time Warner’s estimated cost for services rendered.
Intercompany accounts and transactions between consolidated companies have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles
(“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and footnotes thereto. Actual results could differ from those estimates.
Significant estimates inherent in the preparation of the consolidated financial statements include accounting
for asset impairments, allowances for doubtful accounts, investments, depreciation and amortization, business
combinations, pension benefits, equity-based compensation, income taxes, contingencies and certain programming
arrangements. Allocation methodologies used to prepare the consolidated financial statements are based on
estimates and have been described in the notes, where appropriate.
Reclassifications
Certain reclassifications have been made to the prior years’ financial information to conform to the
December 31, 2007 presentation.
2. RECENT ACCOUNTING STANDARDS
Accounting Standards Adopted in 2007
Accounting for Sabbatical Leave and Other Similar Benefits
On January 1, 2007, the Company adopted the provisions of Emerging Issues Task Force (“EITF”) Issue
No. 06-2, Accounting for Sabbatical Leave and Other Similar Benefits (“EITF 06-2”), related to certain sabbatical
leave and other employment arrangements that are similar to a sabbatical leave. EITF 06-2 provides that an
employee’s right to a compensated absence under a sabbatical leave or similar benefit arrangement in which the
employee is not required to perform any duties during the absence is an accumulating benefit. Therefore, such
arrangements should be accounted for as a liability with the cost recognized over the service period during which
the employee earns the benefit. Adoption of this guidance resulted in a decrease in retained earnings of $62 million
($37 million, net of tax) on January 1, 2007. The resulting change in the accrual for the year ended December 31,
2007 was not material.
Accounting for Uncertainty in Income Taxes
On January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109 (“FIN 48”), which clarifies the
accounting for uncertainty in income tax positions. Refer to Note 9 for further details regarding FIN 48.
84
TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)