Time Warner Cable 2010 Annual Report Download - page 88

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(losses) is included in the consolidated statement of operations; and only the dividends, cash distributions, loans or other
cash received from the investee, additional cash investments, loan repayments or other cash paid to the investee are
included in the consolidated statement of cash flows. TWC’s investments are primarily accounted for using the equity
method of accounting.
Additionally, the carrying value of investments accounted for using the equity method of accounting is adjusted
downward to reflect any other-than-temporary declines in value. 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. TWC
evaluates available information (e.g., budgets, business plans, financial statements, etc.) in addition to quoted market
prices, if any, 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 all-inclusive 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. Refer to Note 7 for further details related to the Company’s investments.
Long-lived Assets
TWC’s long-lived assets consist primarily of property, plant and equipment and finite-lived intangible assets (e.g.,
cable franchise renewals and access rights). Property, plant and equipment are stated at cost and depreciation on these
assets is provided using the straight-line method over their estimated useful lives. Acquired customer relationships are
capitalized and amortized over their estimated useful life and costs to negotiate and renew cable franchise rights are
capitalized and amortized over the term of the new franchise agreement.
TWC incurs expenditures associated with the construction of its cable systems. Costs associated with the
construction of transmission and distribution facilities are capitalized. With respect to customer premise equipment,
which includes set-top boxes and high-speed data and telephone modems, TWC capitalizes installation costs only upon
the initial deployment of these assets. All costs incurred in subsequent disconnects and reconnects of previously installed
customer premise equipment are expensed as incurred. 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.
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.
76
TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)