Charter 2002 Annual Report Download - page 83

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002, 2001 and 2000
(dollars in millions, except where indicated)
2002, the Company adopted SFAS No. 142, which eliminates the amortization of goodwill and indeÑnite lived
intangible assets. Accordingly, beginning January 1, 2002, all franchises that qualify for indeÑnite life
treatment under SFAS No. 142 are no longer amortized against earnings but instead are tested for impairment
annually as of October 1, or more frequently as warranted by events or changes in circumstances (See
Note 8). Certain franchises did not qualify for indeÑnite-life treatment due to technological or operational
factors that limit their lives. These franchise costs are amortized on a straight-line basis over 10 years. Costs
incurred in renewing cable franchises are deferred and amortized over 10 years.
Prior to the adoption of SFAS No. 142, costs incurred in obtaining and renewing cable franchises were
deferred and amortized using the straight-line method over a period of 15 years. Franchise rights acquired
through the purchase of cable systems were generally amortized using the straight-line method over a period
of 15 years. The period of 15 years was management's best estimate of the useful lives of the franchises and
assumed that substantially all of those franchises that expired during the period would be renewed but not
indeÑnitely. The Company evaluated the recoverability of franchises for impairment when events or changes
in circumstances indicated that the carrying amount of an asset may not be recoverable. Because substantially
all of the Company's franchise rights have been acquired in the past several years, at the time of acquisition
management believed the Company did not have suÇcient experience with the local franchise authorities to
conclude that renewals of franchises could be accomplished indeÑnitely.
The Company believes that facts and circumstances have changed to enable it to conclude that
substantially all of its franchises will be renewed indeÑnitely, with those franchises where technological or
operational factors limit their lives continuing to be amortized. The Company has suÇciently upgraded the
technological state of its cable systems and now has suÇcient experience with the local franchise authorities
where it acquired franchises to conclude substantially all franchises will be renewed indeÑnitely.
Other Assets
Other assets primarily include goodwill, deferred Ñnancing costs and investments in equity securities.
Costs related to borrowings are deferred and amortized to interest expense using the eÅective interest method
over the terms of the related borrowings. As of December 31, 2002, 2001 and 2000, other assets include
$231 million, $230 million and $171 million of deferred Ñnancing costs, net of accumulated amortization of
$106 million, $67 million and $35 million, respectively.
Investments in equity securities are accounted for at cost, under the equity method of accounting or in
accordance with Statement of Financial Accounting Standards (SFAS) No. 115, ""Accounting for Certain
Investments in Debt and Equity Securities.'' Charter recognizes losses for any decline in value considered to
be other than temporary. Certain marketable equity securities are classiÑed as available-for-sale and reported
at market value with unrealized gains and losses recorded as accumulated other comprehensive income or loss.
The following summarizes investment information as of and for the years ended December 31, 2002,
2001 and 2000 (in millions):
Carrying Value at Gain (Loss) for the Year
December 31, Ended December 31,
2002 2001 2000 2002 2001 2000
Equity investments, under the cost methodÏÏÏÏ $17 $13 $14 $Ì $ (8) $(12)
Equity investments, under the equity methodÏÏ 16 12 49 (5) (42) (8)
Marketable securities, at market value ÏÏÏÏÏÏÏ Ì442(4)1
$33 $29 $67 $(3) $(54) $(19)
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