Charter 2003 Annual Report Download - page 107

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003, 2002 and 2001
(dollars in millions, except where indicated)
3. Summary of SigniÑcant Accounting Policies
Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less to
be cash equivalents. These investments are carried at cost, which approximates market value.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost, including all material, labor and certain indirect costs
associated with the construction of cable transmission and distribution facilities. Costs associated with initial
customer installations and the additions of network equipment necessary to enable advanced services are
capitalized. Costs capitalized as part of initial customer installations include materials, labor, and certain
indirect costs. These indirect costs are associated with the activities of the Company's personnel who assist in
connecting and activating the new service and consist of compensation and overhead costs associated with
these support functions. Overhead costs primarily include employee beneÑts and payroll taxes, direct variable
costs associated with capitalizable activities, consisting primarily of installation and construction vehicle costs,
the cost of dispatch personnel and indirect costs directly attributable to capitalizable activities. The costs of
disconnecting service at a customer's dwelling or reconnecting service to a previously installed dwelling are
charged to operating expense in the period incurred. Costs for repairs and maintenance are charged to
operating expense as incurred, while equipment replacement and betterments, including replacement of cable
drops from the pole to the dwelling, are capitalized.
Depreciation is recorded using the straight-line method over management's estimate of the useful lives of
the related assets as follows:
Cable distribution systemsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7-15 years
Customer equipment and installations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3-5 years
Vehicles and equipmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1-5 years
Buildings and leasehold improvementsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5-15 years
Furniture and ÑxturesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5 years
Franchises
Franchise rights represent the value attributed to agreements with local authorities that allow access to
homes in cable service areas acquired through the purchase of cable systems. Management estimates the fair
value of franchise rights at the date of acquisition and determines if the franchise has a Ñnite life or an
indeÑnite life as deÑned by Statement of Financial Accounting Standards (""SFAS'') No. 142, Goodwill and
Other Intangible Assets. On January 1, 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 7). The Company concluded that 99% of its franchises qualify
for indeÑnite-life treatment; however, 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
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