Washington Post 2008 Annual Report Download - page 73

available-for-sale and therefore are recorded at fair value in the
consolidated financial statements, with the change in fair value
during the period excluded from earnings and recorded net of tax
as a separate component of other 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.
Fair Value of Financial Instruments — The carrying amount
reported in the Company’s consolidated financial statements for
cash and cash equivalents, accounts receivable, accounts payable
and accrued liabilities, deferred revenue and the current portion of
debt approximate fair value because of the short-term nature of
these financial instruments. The fair value of long-term debt is
determined based on a number of observable inputs, including the
current market activity of the Company’s publicly traded notes,
trends in investor demands and market values of comparable
publicly traded debt.
Inventories — Inventories are stated at the lower of cost or current
market value. Cost of newsprint is determined on the first-in, first-out
(“FIFO”) method, and cost of magazine paper is determined on 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
expensed 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 their useful lives or the terms of the
respective leases.
The cable television 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. The cost of subsequent
disconnects and reconnects are expensed as they are incurred.
Evaluation of Long-Lived Assets — The recoverability of long-lived
assets and finite-lived 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 the asset’s recorded value. An impairment charge is
measured based on estimated fair market value, determined
primarily using estimated future cash flows on a discounted basis.
Losses on long-lived assets to be disposed are determined in a
similar manner, but the fair market value would be reduced for
estimated costs to dispose.
Goodwill and Other Intangible Assets — The Company accounts
for goodwill and other intangible assets in accordance with
Statement of Financial Accounting Standards (“SFAS”) No. 142,
“Goodwill and Other Intangible Assets” (“SFAS 142”). Goodwill is
the excess of purchase price over the fair value of identified net
assets of businesses acquired. The Company’s intangible assets
with an indefinite life are principally from franchise agreements at its
cable television division, as the Company expects its cable
franchise agreements to provide the Company with substantial
benefit for a period that extends beyond the foreseeable horizon,
and the Company’s cable television division historically has
obtained renewals and extensions of such agreements for nominal
costs and without any material modifications to the agreements.
Amortized intangible assets are primarily mastheads, customer
relationship intangibles, non-compete agreements, trademarks and
databases, with amortization periods up to 15 years.
The Company reviews goodwill and indefinite-lived intangibles at
least annually, as of November 30, for possible impairment. All
other intangible assets are amortized over their useful lives. The
Company reviews the carrying value of goodwill and indefinite-lived
intangible assets utilizing a discounted cash flow model and a
market approach employing comparable sales analysis. In reviewing
the carrying value of goodwill and indefinite-lived intangible assets at
the cable television division, the Company aggregates its cable
systems on a regional basis. The Company makes assumptions
regarding estimated future cash flows and market values to determine
a reporting unit’s estimated fair value. If these estimates or related
assumptions change in the future, the Company may be required to
record additional impairment charges.
Program Rights — The broadcast subsidiaries are parties to
agreements that entitle them to show syndicated and other programs
on television. The costs of such program rights and the related
liabilities are recorded at the gross amount of the liabilities when the
programs are available for broadcasting, and such costs are
charged to operations as the programming is aired.
Equity Method Investments — 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 exerts 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), 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 (expense) income, net in
the Company’s consolidated financial statements. Fair value
estimates are based on a review of the investees’ product
development activities, historical financial results and projected
discounted cash flows.
Revenue Recognition — Revenue is recognized when persuasive
evidence of an arrangement exists, the fees are fixed or
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