Time Warner Cable 2011 Annual Report Download - page 115

TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Significant components of TWC’s deferred income tax liabilities, net, as of December 31, 2011 and 2010 are as follows
(in millions):
December 31,
2011 2010
Equity-based compensation ................................................... $ 114 $ 175
Investments ............................................................... 134 147
Other(a) .................................................................... 536 369
Valuation allowances(b) ....................................................... (67) (57)
Deferred income tax assets ................................................. 717 634
Cable franchise rights and customer relationships, net(c) ............................. (6,698) (6,481)
Property, plant and equipment ................................................. (3,941) (3,587)
Other ..................................................................... (9) (53)
Deferred income tax liabilities ............................................... (10,648) (10,121)
Deferred income tax liabilities, net(d) .......................................... $ (9,931) $ (9,487)
(a) Other deferred income tax assets includes net operating loss carryforwards of $67 million and $15 million as of December 31, 2011 and 2010,
respectively, and tax credit carryforwards of $37 million and $20 million as of December 31, 2011 and 2010, respectively. These net operating loss and
tax credit carryforwards expire in varying amounts through 2031.
(b) The Company has recorded a valuation allowance for deferred income tax assets associated with its equity-method investment in Clearwire
Communications, as well as certain state credit carryforwards. The valuation allowance is based upon the Company’s assessment that it is more likely
than not that a portion of the deferred income tax asset will not be realized. As of December 31, 2011 and 2010, the gross deferred income tax asset
related to the Company’s equity-method investment in Clearwire Communications was $97 million and $88 million, and the net deferred income tax
asset was $51 million and $42 million, respectively. The net change in the valuation allowance of $10 million during 2011 relates to certain state tax
credit carryforwards. As discussed further in Note 7, in the quarter in which the SpectrumCo transaction closes, the Company expects to record a
noncash income tax benefit of approximately $45 million related to an adjustment to the Company’s valuation allowance for deferred income tax assets
associated with its equity-method investment in Clearwire Communications.
(c) Cable franchise rights and customer relationships is comprised of deferred income tax assets (approximately $500 million) where the tax basis exceeds
the book basis primarily as a result of the impairment recorded in 2008 that are expected to be realized as the Company receives tax deductions from the
amortization, for tax purposes, of the intangible assets offset by deferred income tax liabilities (approximately $7.2 billion) that are associated with
intangible assets for which the book basis is greater than the tax basis.
(d) Deferred income tax liabilities, net, includes current deferred income tax assets of $267 million and $150 million as of December 31, 2011 and 2010,
respectively.
Changes in the Company’s deferred income tax liabilities, net, from January 1 through December 31 are presented
below (in millions):
2011 2010
Balance at beginning of year ................................................... $ (9,487) $ (8,818)
Deferred income tax provision ................................................. (638) (687)
Acquisition of NaviSite ....................................................... 65 —
Recorded directly to TWC shareholders’ equity as a component of:
Additional paid-in capital:
Equity-based compensation ............................................... (43) 45
Accumulated other comprehensive loss, net:
Change in unrealized losses on pension benefit obligation ....................... 160 (25)
Change in deferred gains (losses) on cash flow hedges .......................... 12 (2)
Balance at end of year ........................................................ $ (9,931) $ (9,487)
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