Charter 2003 Annual Report Download - page 114

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003, 2002 and 2001
(dollars in millions, except where indicated)
6. Property, Plant and Equipment
Property, plant and equipment consists of the following as of December 31, 2003 and 2002:
2003 2002
Cable distribution systems ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 9,507 $ 8,950
Land, buildings and leasehold improvements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 583 580
Vehicles and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 874 783
10,964 10,313
Less: accumulated depreciation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3,950) (2,634)
$ 7,014 $ 7,679
The Company periodically evaluates the estimated useful lives used to depreciate its assets and the
estimated amount of assets that will be abandoned or have minimal use in the future. A signiÑcant change in
assumptions about the extent or timing of future asset retirements, or in the Company's use of new technology
and upgrade programs, could materially aÅect future depreciation expense.
Depreciation expense for the years ended December 31, 2003, 2002 and 2001 was $1.5 billion, $1.4 billion
and $1.2 billion, respectively.
7. Franchises and Goodwill
The Company constructs and operates its cable systems under non-exclusive franchises that are granted
by state or local government authorities for varying lengths of time. As of December 31, 2003, the Company
had approximately 4,400 franchises in areas located throughout the United States. The Company obtained
these franchises primarily through acquisitions of cable systems accounted for as purchase business
combinations. These acquisitions have primarily been for the purpose of acquiring existing franchises and
related infrastructure and, as such, the primary asset acquired by the Company has historically been cable
franchises.
On January 1, 2002, the Company adopted SFAS No. 142, which eliminates the amortization of
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 will be
tested for impairment annually, or more frequently as warranted by events or changes in circumstances.
During the Ñrst quarter of 2002, the Company had an independent appraiser perform valuations of its
franchises as of January 1, 2002. Based on the guidance prescribed in EITF Issue No. 02-7, Unit of
Accounting for Testing of Impairment of IndeÑnite-Lived Intangible Assets, franchises were aggregated into
essentially inseparable asset groups to conduct the valuations. The asset groups generally represented
geographic clusters of the Company's cable systems, which management then believed represented the highest
and best use of those assets. Fair value was determined based on estimated discounted future cash Öows using
assumptions that are consistent with internal forecasts. As a result, the Company determined that franchises
were impaired and recorded the cumulative eÅect of a change in accounting principle of $206 million
(approximately $572 million before minority interest eÅects of $306 million and tax eÅects of $60 million).
The eÅect of adoption was to increase net loss and loss per share by $206 million and $0.70, respectively. As
required by SFAS No. 142, the standard has not been retroactively applied to the results for the period prior to
adoption.
The Company performed its annual impairment assessment as of October 1, 2002 using an independent
third-party appraiser and following the guidance of EITF Issue 02-17, Recognition of Customer Relationship
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