Time Warner Cable 2012 Annual Report Download - page 121

TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Significant components of TWC’s deferred income tax liabilities, net, as of December 31, 2012 and 2011 are as follows
(in millions):
December 31,
2012 2011
Cable franchise rights and customer relationships, net(a) .................................$ (7,675) $ (6,698)
Property, plant and equipment ..................................................... (4,081) (3,941)
Other ......................................................................... (17) (9)
Deferred income tax liabilities ................................................... (11,773) (10,648)
Net operating loss carryforwards(b) .................................................. 322 67
Tax credit carryforwards(b) ........................................................ 36 37
Other ......................................................................... 470 680
Valuation allowances(c) ........................................................... (18) (67)
Deferred income tax assets ...................................................... 810 717
Deferred income tax liabilities, net(d) ..............................................$ (10,963) $ (9,931)
(a) Cable franchise rights and customer relationships, net, includes deferred income tax assets of approximately $170 million and $500 million as of
December 31, 2012 and 2011, respectively, that relate to intangible assets for which the tax basis exceeds the book basis primarily as a result of the
impairment recorded in 2008. These deferred income tax assets are expected to be realized as the Company amortizes the intangible assets for tax
purposes.
(b) Net operating loss and tax credit carryforwards expire in varying amounts through 2032. Aside from certain state tax credit carryforwards for which a
valuation allowance has been established, the Company does not expect these carryforwards to expire unutilized.
(c) The Company’s valuation allowance for deferred income tax assets recorded as of December 31, 2012, relates to certain state tax credit carryforwards
and, as of December 31, 2011, relates to its equity-method investment in Clearwire Communications, as well as certain state tax 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. The net decrease in the valuation allowance of $49 million during 2012 primarily relates to the reversal of a $46 million valuation allowance
against a deferred income tax asset associated with the Company’s equity-method investment in Clearwire Communications, which had been
established due to the uncertainty of realizing the full benefit of such asset.
(d) Deferred income tax liabilities, net, includes current deferred income tax assets of $317 million and $267 million as of December 31, 2012 and 2011,
respectively.
Changes in the Company’s deferred income tax liabilities, net, from January 1 through December 31 are presented
below (in millions):
2012 2011 2010
Balance at beginning of year ..........................................$ (9,931) $ (9,487) $ (8,818)
Deferred income tax provision ......................................... (562) (638) (687)
Business acquisitions(a) ............................................... (530) 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 accumulated unrealized losses on pension benefit obligation ..... 100 160 (25)
Change in accumulated deferred gains (losses) on cash flow hedges ....... (40) 12 (2)
Balance at end of year ................................................$ (10,963) $ (9,931) $ (9,487)
(a) Business acquisitions relates to the acquisition of Insight in 2012 and NaviSite in 2011.
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