Time Warner Cable 2007 Annual Report Download - page 92

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As of December 31, 2007 and 2006, the Company’s property, plant and equipment and related accumulated
depreciation included the following (in millions):
2007 2006
Estimated
Useful Lives
December 31,
Land, buildings and improvements
(a)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,070 $ 910 10-20 years
Distribution systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,940 10,531 3-25 years
(b)
Converters and modems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,488 3,630 3-5 years
Vehicles and other equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,267 1,835 3-10 years
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 425 637
21,190 17,543
Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,317) (5,942)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,873 $ 11,601
(a)
Land, buildings and improvements includes $147 million and $139 million of land as of December 31, 2007 and 2006, respectively, which
is not depreciated.
(b)
Weighted-average useful lives for distribution systems are approximately 12 years.
Capitalized Software Costs
TWC capitalizes certain costs incurred for the development of internal use software. These costs, which
include the costs associated with coding, software configuration, upgrades and enhancements, are included in
property, plant and equipment in the consolidated balance sheet. Such costs are depreciated on a straight-line basis
over 3 to 5 years. These costs, net of accumulated depreciation, totaled $457 million and $371 million as of
December 31, 2007 and 2006, respectively. Amortization of capitalized software costs was $115 million in 2007,
$81 million in 2006 and $54 million in 2005.
Intangible Assets
TWC has a significant number of intangible assets, including customer relationships and cable franchises.
Customer relationships and cable franchises acquired in business combinations are recorded at fair value on the
Company’s consolidated balance sheet. Other costs incurred to negotiate and renew cable franchise agreements are
capitalized as incurred. Customer relationships acquired are amortized on a straight-line basis over their estimated
useful life (4 years) and other costs incurred to gain access to sell services to a particular property and to negotiate
and renew cable franchise agreements are amortized over the term of such franchise agreements.
Asset Impairments
Investments
TWC’s investments are primarily accounted for using the equity method of accounting. A subjective aspect of
accounting for investments involves determining whether an other-than-temporary decline in value of the
investment has been sustained. If it has been determined that an investment has sustained an other-than-
temporary decline in its value, the investment is written down to its fair value by a charge to earnings. This
evaluation is dependent on the specific facts and circumstances. For investments accounted for using the cost or
equity method of accounting, TWC evaluates information (e.g. budgets, business plans, financial statements, etc.)
in determining whether an other-than-temporary decline in value exists. Factors indicative of an other-than-
temporary decline include recurring operating losses, credit defaults and subsequent rounds of financing at an
amount below the cost basis of the Company’s investment. This list is not exhaustive and the Company weighs all
known quantitative and qualitative factors in determining if an other-than-temporary decline in the value of an
investment has occurred.
87
TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)