Time Warner Cable 2010 Annual Report Download - page 126

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Time Warner Inc. In the condensed consolidating financial statements, income tax provision has been presented based on
each subsidiary’s legal entity basis. Deferred taxes of the Parent Company, the Guarantor Subsidiaries and the Non-
Guarantor Subsidiaries have been presented based upon the temporary differences between the carrying amounts of the
respective assets and liabilities of the applicable entities.
Certain administrative costs incurred by the Parent Company, the Guarantor Subsidiaries or the Non-Guarantor
Subsidiaries are allocated to the various entities based on the relative number of video subscribers at each entity.
Effective January 1, 2010, the Company prospectively modified its intercompany transfer pricing agreement for
certain services. While this modification did not materially impact net income of either the Guarantor Subsidiaries or the
Non-Guarantor Subsidiaries, it did increase revenues and associated expenses (including expenses reported as
intercompany royalties) for the Non-Guarantor Subsidiaries and reduced revenues and associated expenses for the
Guarantor Subsidiaries.
Prior to October 1, 2009, interest income (expense), net, was determined based on third-party debt and the relevant
intercompany amounts within the respective legal entity. Beginning October 1, 2009, the Parent Company began to
allocate interest expense to certain subsidiaries based on each subsidiary’s contribution to revenues. This allocation serves
to reduce the Parent Company’s interest expense and increase the interest expense of both the Guarantor Subsidiaries and
Non-Guarantor Subsidiaries.
114
TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)