Washington Post 2014 Annual Report Download - page 81

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 determinable,
the product or service has been delivered and collectability is
reasonably assured. The Company considers the terms of each
arrangement to determine the appropriate accounting treatment.
Education revenues. Tuition revenue is recognized ratably over the
period of instruction as services are delivered to students, net of any
refunds, corporate discounts, scholarships and employee tuition
discounts. At KTP and International divisions, estimates of average
student course length are developed for each course, and these
estimates are evaluated on an ongoing basis and adjusted as
necessary. Online access revenue is recognized ratably over the
period of access. Course material revenue is recognized over the
same period as the tuition or online access, if related, or when the
products are delivered, if not related. Other revenues, such as
student support services, are recognized when the services are
provided.
KHE, through the Kaplan Commitment program, provides first-time
students with a risk-free trial period. Under the program, KHE
monitors academic progress and conducts assessments to help
determine whether students are likely to be successful in their chosen
course of study. Students who withdraw or are subject to dismissal
during the risk-free trial period do not incur any significant financial
obligation. The Company does not recognize revenues related to
coursework until the students complete the risk-free period and
decide to continue with their studies, at which time the fees become
fixed or determinable.
KHE’s refund policy may permit students who do not complete a
course to be eligible for a refund for the portion of the course they did
not attend. The amount of the refund differs by school, program and
state, as some states require different policies. Refunds generally result
in a reduction in deferred revenue during the period that a student
drops or withdraws from a class because the associated tuition
revenue is recognized daily over the period of instruction as the
services are delivered.
Cable revenues. Cable revenues are primarily derived from
subscriber fees for video, high-speed data and voice services, and
from advertising. Cable subscriber revenue is recognized monthly,
as services are delivered. Advertising revenue is recognized when
the commercials or programs are aired.
Television broadcasting revenues. Advertising revenues are recognized,
net of agency commissions, when the underlying advertisement is
broadcast. Retransmission revenues are recognized over the term of the
agreement based on monthly subscriber counts and contractual rates.
Revenue presentation.The determination of whether revenue should
be reported on a gross or net basis is based on an assessment of
whether the Company acts as a principal or an agent in the
transaction. In certain cases, the Company is considered the agent,
and the Company records revenue equal to the net amount retained
when the fee is earned. In these cases, costs incurred with third-party
suppliers are excluded from the Company’s revenue. The Company
assesses whether it or the third-party supplier is the primary obligor and
evaluates the terms of its customer arrangements as part of this
assessment. In addition, the Company considers other key indicators
such as latitude in establishing price, inventory risk, nature of services
performed, discretion in supplier selection and credit risk.
Deferred revenue. Amounts received from customers in advance of
revenue recognition are deferred as liabilities. Deferred revenue to
be earned after one year is included in other noncurrent liabilities in
the Company’s Consolidated Financial Statements.
Leases. The Company leases substantially all of its educational
facilities and enters into various other lease agreements in
conducting its business. At the inception of each lease, the
Company evaluates the lease agreement to determine whether the
lease is an operating or capital lease. Additionally, many of the
Company’s lease agreements contain renewal options, tenant
improvement allowances, rent holidays and/or rent escalation
clauses. When such items are included in a lease agreement, the
Company records a deferred rent asset or liability in the
Consolidated Financial Statements and records these items in rent
expense evenly over the terms of the lease.
The Company is also required to make additional payments under
operating lease terms for taxes, insurance and other operating
expenses incurred during the operating lease period; such items are
expensed as incurred. Rental deposits are included as other assets
in the Consolidated Financial Statements for lease agreements that
require payments in advance or deposits held for security that are
refundable, less any damages, at the end of the respective lease.
Pensions and Other Postretirement Benefits. The Company
maintains various pension and incentive savings plans. Substantially
all of the Company’s employees are covered by these plans. The
Company also provides health care and life insurance benefits to
certain retired employees. These employees become eligible for
benefits after meeting age and service requirements.
The Company recognizes the overfunded or underfunded status of a
defined benefit postretirement plan as an asset or liability in its
statement of financial position and recognizes changes in that funded
status in the year in which the changes occur through comprehensive
income. The Company measures changes in the funded status of its
plans using the projected unit credit method and several actuarial
assumptions, the most significant of which are the discount rate, the
long-term rate of asset return and rate of compensation increase. The
Company uses a measurement date of December 31 for its pension
and other postretirement benefit plans.
Self-Insurance. The Company uses a combination of insurance and
self-insurance for a number of risks, including claims related to
employee health care and dental care, disability benefits, workers’
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