Washington Post 2007 Annual Report Download - page 76

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year. The Company reports on a 52- to 53-week fiscal
year ending on the Sunday nearest December 31. The fiscal years
2007, 2006 and 2005, which ended on December 30, 2007,
December 31, 2006 and January 1, 2006, respectively,
included 52 weeks. With the exception of most of the
newspaper publishing operations, subsidiaries of the Company
report on a calendar-year basis.
Principles of Consolidation. The accompanying financial
statements include the accounts of the Company and its
subsidiaries; significant intercompany transactions have been
eliminated.
Presentation. In 2007, the Company made changes to certain
departments and cost centers at several of its divisions. Prior year
amounts were reclassified to conform with the current year
presentation, resulting in a net increase to selling, general and
administrative expenses and a net decrease to operating
expenses. Certain other amounts in previously issued financial
statements have also been reclassified to conform with the current
year presentation.
Use of Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the amounts reported in the financial statements. Actual
results could differ from those estimates.
Cash Equivalents. Short-term investments with original maturities
of 90 days or less are considered cash equivalents.
Investments in Marketable Equity Securities. The Company’s
investments in marketable equity securities are classified as
available-for-sale and therefore are recorded at fair value in
theConsolidatedBalanceSheets,withthechangeinfairvalue
during the period excluded from earnings and recorded net of tax
as a separate component of comprehensive income. Marketable
equity securities the Company expects to hold long term are
classified as non-current assets. If the fair value of a
marketable equity security declines below its cost basis and the
decline is considered other than temporary, the Company will
record a write-down, which is included in earnings.
Inventories. Inventories are valued at the lower of cost or market.
Cost of newsprint is determined by the first-in, first-out method,
and cost of magazine paper is determined by the specific-cost
method.
Property, Plant and Equipment. Property, plant and equipment
is recorded at cost and includes interest capitalized in connection
with major long-term construction projects. Replacements and
major improvements are capitalized; maintenance and repairs
are charged to operations as incurred.
Depreciation is calculated using the straight-line method over the
estimated useful lives of the property, plant and equipment: 3 to
20 years for machinery and equipment, and 20 to 50 years for
buildings. The costs of leasehold improvements are amortized
over the lesser of the useful lives or the terms of the respective
leases.
The cable division capitalizes costs associated with the
construction of cable transmission and distribution facilities and
new cable service installations. Costs include all direct labor and
materials, as well as certain indirect costs.
Investments in Affiliates. The Company uses the equity method
of accounting for its investments in and earnings or losses of
affiliates that it does not control, but over which it does exert
significant influence. The Company considers whether the fair
values of any of its equity method investments have declined
below their carrying value whenever adverse events or
changes in circumstances indicate that recorded values may
not be recoverable. If the Company considered any such
decline to be other than temporary (based on various factors,
including historical financial results, product development
activities and the overall health of the affiliate’s industry), then
a write-down would be recorded to estimated fair value.
Cost Method Investments. The Company uses the cost method of
accounting for its minority investments in non-public companies
where it does not have significant influence over the operations
and management of the investee. Investments are recorded at the
lower of cost or fair value as estimated by management. Charges
recorded to write down cost method investments to their estimated
fair value and gross realized gains or losses upon the sale of cost
method investments are included in “Other income (expense), net”
in the Consolidated Statements of Income. Fair value estimates
are based on a review of the investees’ product development
activities, historical financial results and projected discounted
cash flows.
Goodwill and Other Intangibles. The Company reviews
goodwill and indefinite-lived intangibles at least annually for
impairment. All other intangible assets are amortized over their
useful lives. The Company reviews the carrying value of goodwill
and indefinite-lived intangible assets generally utilizing a
discounted cash flow model. In the case of the Company’s
cable systems, both a discounted cash flow model and a
market approach employing comparable sales analysis are
considered. In reviewing the carrying value of goodwill and
indefinite-lived intangible assets at the cable division, the
Company aggregates its cable systems on a regional basis.
The Company must make assumptions regarding estimated
future cash flows and market values to determine a reporting
unit’s estimated fair value. If these estimates or related
assumptionschangeinthefuture,theCompanymaybe
required to record an impairment charge.
Long-Lived Assets. The recoverability of long-lived assets other
than goodwill and other intangibles is assessed whenever
adverse events or changes in circumstances indicate that
recorded values may not be recoverable. A long-lived asset is
considered to be not recoverable when the undiscounted
estimated future cash flows are less than its recorded value. An
impairment charge is measured based on estimated fair market
60 THE WASHINGTON POST COMPANY