Time Warner Cable 2008 Annual Report Download - page 106

Property, Plant and Equipment
Property, plant and equipment are stated at cost. TWC incurs expenditures associated with the construction of
its cable systems. Costs associated with the construction of the cable transmission and distribution facilities and new
cable service installations are capitalized. With respect to certain customer premise equipment, which includes set-
top boxes and high-speed data and telephone cable modems, TWC capitalizes installation charges only upon the
initial deployment of these assets. All costs incurred in subsequent disconnects and reconnects are expensed as
incurred. Depreciation on these assets is provided generally using the straight-line method over their estimated
useful lives.
TWC uses standard capitalization rates to capitalize installation activities. Significant judgment is involved in
the development of these capitalization standards, including the average time required to perform an installation and
the determination of the nature and amount of indirect costs to be capitalized. Additionally, the development of
capitalization standards for new products involves more estimates than those used for established products because
the Company has less historical data related to the installation of new products. The capitalization standards are
reviewed at least annually and adjusted, if necessary, based on comparisons to actual costs incurred.
TWC generally capitalizes expenditures for tangible fixed assets having a useful life of greater than one year.
Types of capitalized expenditures include: customer premise equipment, scalable infrastructure, line extensions,
plant upgrades and rebuilds and support capital.
As of December 31, 2008 and 2007, the Company’s property, plant and equipment and related accumulated
depreciation included the following (in millions):
2008 2007
Estimated
Useful Lives
December 31,
Land, buildings and improvements
(a)
........................... $ 1,159 $ 1,070 10-20 years
Distribution systems ....................................... 14,492 12,940 3-25 years
(b)
Converters and modems .................................... 5,081 4,447 3-5 years
Capitalized software costs .................................. 937 738 3-5years
Vehicles and other equipment ................................ 1,635 1,529 3-10 years
Construction in progress .................................... 496 466
23,800 21,190
Less: accumulated depreciation............................... (10,263) (8,317)
Total .................................................. $13,537 $12,873
(a)
Land, buildings and improvements includes $147 million related to land as of both December 31, 2008 and 2007, 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 $505 million and $457 million as of
December 31, 2008 and 2007, respectively. Amortization of capitalized software costs was $157 million in 2008,
$115 million in 2007 and $81 million in 2006.
Intangible Assets
TWC has a significant number of intangible assets, including customer relationships and cable franchise
rights. Customer relationships and cable franchise rights 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
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)