Washington Post 2014 Annual Report Download - page 80

For assets that are measured using quoted prices in active markets,
the total fair value is the published market price per unit multiplied
by the number of units held, without consideration of transaction
costs. Assets and liabilities that are measured using significant other
observable inputs are primarily valued by reference to quoted prices
of similar assets or liabilities in active markets, adjusted for any
terms specific to that asset or liability.
The Company measures certain assets—including goodwill; intangible
assets; property, plant and equipment; cost and equity-method
investments—at fair value on a nonrecurring basis when they are
deemed to be impaired. The fair value of these assets is determined
with valuation techniques using the best information available and may
include quoted market prices, market comparables and discounted
cash flow models.
Fair Value of Financial Instruments. The carrying amounts reported
in the Company’s Consolidated Financial Statements for cash and
cash equivalents, restricted cash, accounts receivable, accounts
payable and accrued liabilities, the current portion of 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. The fair value of
the interest rate hedge is determined based on a number of
observable inputs, including time to maturity and market interest rates.
Inventories and Contracts in Progress. Inventories and contracts in
progress are stated at the lower of cost or realizable values and are
based on the first-in, first-out (FIFO) 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; 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 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 intangible assets is assessed whenever adverse
events or changes in circumstances indicate that recorded values
may not be recoverable. A long-lived asset is considered to not be
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 of are determined in a similar
manner, but the fair market value would be reduced for estimated
costs to dispose.
Goodwill and Other Intangible Assets. 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 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 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 student and customer
relationships and trade names and trademarks, with amortization
periods up to 10 years.
The Company reviews goodwill and indefinite-lived intangible assets
at least annually, as of November 30, for possible impairment.
Goodwill and indefinite-lived intangible assets are reviewed for
possible impairment between annual tests if an event occurs or
circumstances change that would more likely than not reduce the fair
value of the reporting unit or indefinite-lived intangible asset below its
carrying value. The Company tests its goodwill at the reporting unit
level, which is an operating segment or one level below an
operating segment. In reviewing the carrying value of indefinite-lived
intangible assets at the cable division, the Company aggregates its
cable systems on a regional basis. The Company initially assesses
qualitative factors to determine if it is necessary to perform the two-
step goodwill impairment review or indefinite-lived intangible asset
quantitative impairment review. The Company reviews the goodwill
for impairment using the two-step process and the indefinite-lived
intangible assets using the quantitative process if, based on its
assessment of the qualitative factors, it determines that it is more likely
than not that the fair value of a reporting unit or indefinite-lived
intangible asset is less than its carrying value, or if it decides to
bypass the qualitative assessment. The Company reviews the
carrying value of goodwill and indefinite-lived intangible assets
utilizing a discounted cash flow model, and, where appropriate, a
market value approach is also utilized to supplement the discounted
cash flow model. The Company makes assumptions regarding
estimated future cash flows, discount rates, long-term growth rates
and market values to determine each reporting unit’s and indefinite-
lived intangible asset’s estimated fair value. If these estimates or
related assumptions change in the future, the Company may be
required to record impairment charges.
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 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 nonpublic companies
where it does not have significant influence over the operations
64 GRAHAM HOLDINGS COMPANY