Washington Post 2003 Annual Report Download - page 64

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES significant influence. The Company considers whether the fair values
of any of its equity method investments have declined below their
Fiscal Year. The Company reports on a 52- to 53-week fiscal carrying value whenever adverse events or changes in circum-
year ending on the Sunday nearest December 31. The fiscal years stances indicate that recorded values may not be recoverable. If
2003, 2002 and 2001, which ended on December 28, 2003, the Company considered any such decline to be other than tempo-
December 29, 2002, and December 30, 2001, respectively, rary (based on various factors, including historical financial results,
included 52 weeks. With the exception of the newspaper publishing product development activities and the overall health of the affili-
operations, subsidiaries of the Company report on a calendar-year ate's industry), a write-down would be recorded to estimated fair
basis. value.
Principles of Consolidation. The accompanying financial Cost Method Investments. The Company uses the cost
statements include the accounts of the Company and its subsidiar- method of accounting for its minority investments in non-public
ies; significant intercompany transactions have been eliminated. companies where it does not have significant influence over the
Presentation. Certain amounts in previously issued financial operations and management of the investee. Investments are
statements have been reclassified to conform with the 2003 recorded at the lower of cost or fair value as estimated by
presentation. management. Charges recorded to write-down cost method invest-
ments to their estimated fair value and gross realized gains or losses
Use of Estimates. The preparation of financial statements in upon the sale of cost method investments are included in ""Other
conformity with generally accepted accounting principles requires income (expense), net'' in the Consolidated Statements of Income.
management to make estimates and assumptions that affect the Fair value estimates are based on a review of the investees' product
amounts reported in the financial statements. Actual results could development activities, historical financial results and projected
differ from those estimates. discounted cash flows.
Cash Equivalents. Short-term investments with original maturities Goodwill and Other Intangibles. Prior to 2002, goodwill
of 90 days or less are considered cash equivalents. and other intangibles were amortized by use of the straight-line
Investments in Marketable Equity Securities. The Com- method over periods ranging from 15 to 40 years (with the
pany's investments in marketable equity securities are classified as majority being amortized over 15 to 25 years). Prior to the
available-for-sale and therefore are recorded at fair value in the adoption of Statement of Financial Accounting Standards No. 142
Consolidated Balance Sheets, with the change in fair value during (SFAS 142), ""Goodwill and Other Intangible Assets,'' the carry-
the period excluded from earnings and recorded net of tax as a ing value of goodwill and other intangible assets was assessed
separate component of comprehensive income. Marketable equity whenever adverse trends and changes in circumstances indicated
securities that the Company expects to hold long term are classified that previously anticipated undiscounted cash flows warranted
as non-current assets. If the fair value of a marketable security assessment. The carrying value of goodwill and other intangible
declines below its cost basis, and the decline is considered other assets would be considered impaired if the projected undiscounted
than temporary, the Company will record a write-down which is future cash flows from a business were less than the carrying value
included in earnings. of the business. Impairment would be measured based on the
amounts that the carrying value of a business exceeded the fair
Inventories. Inventories are valued at the lower of cost or market value (the fair market value determined primarily based on
market. Cost of newsprint is determined by the first-in, first-out projected future cash flows with an appropriate discount rate).
method, and cost of magazine paper is determined by the specific-
cost method. As a result of the adoption of SFAS 142 in 2002, goodwill and
indefinite-lived intangibles are no longer amortized, but are
Property, Plant and Equipment. Property, plant and equip- reviewed at least annually for impairment. All other intangible assets
ment is recorded at cost and includes interest capitalized in connec- are amortized over their useful lives. The Company reviews the
tion with major long-term construction projects. Replacements and carrying value of goodwill and indefinite-lived intangible assets
major improvements are capitalized; maintenance and repairs are utilizing a discounted cash flow model (in the case of the Compa-
charged to operations as incurred. ny's cable systems, both a discounted cash flow model and an
Depreciation is calculated using the straight-line method over the estimated fair market value per cable subscriber approach are
estimated useful lives of the property, plant and equipment: 3 to considered). The Company must make assumptions regarding esti-
20 years for machinery and equipment, and 20 to 50 years for mated future cash flows and market values to determine a reporting
buildings. The costs of leasehold improvements are amortized over unit's estimated fair value. In reviewing the carrying value of
the lesser of the useful lives or the terms of the respective leases. goodwill and indefinite-lived intangible assets at the cable division,
the Company aggregates its cable systems on a regional basis. If
Investments in Affiliates. The Company uses the equity these estimates or related assumptions change in the future, the
method of accounting for its investments in and earnings or losses of Company may be required to record an impairment charge.
affiliates that it does not control but over which it does exert
44 THE WASHINGTON POST COMPANY