Charter 2003 Annual Report Download - page 35

Presented below is a schedule of the costs of cable distribution system assets subject to the rebuild
program, as originally recorded, reconciled to the Ñnal determinations in the restatement. The depreciation
lives were shortened for this asset pool as discussed previously and supplemented below.
Total
(In millions)
Total asset population subject to rebuild and upgrade, as originally
recorded ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 2,998
Assets which were never intended to be replaced but rather were
upgraded and remain in service ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (946)
Cost of assets inadvertently excluded from the asset population ÏÏÏÏÏÏÏÏÏ 401
Adjustment to record acquired assets at depreciated replacement cost at
date of acquisition ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,225)
Total adjusted asset value subject to replacement and thus shortened
depreciation life ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,228
In connection with the restatement process, we conducted a detailed system-by-system analysis of the
rebuild program to identify those assets which were intended to be rebuilt versus upgraded and determined
that approximately $844 million of trunk and distribution cabling, and $102 million of headend equipment (in
aggregate, $946 million) was enhanced and retained in service. Accordingly, an adjustment was made in the
restatement with eÅect from January 1, 2000 to properly exclude those assets from the population of assets
treated as subject to replacement and thus for which a shortened depreciation life was previously assigned.
The evaluation conducted in connection with the restatement also revealed the inadvertent exclusion of
$401 million of trunk and distribution cabling and electronics, which were acquired in 1999, from the
population of assets that were subject to shortened depreciation lives. This group of assets were misclassiÑed
within our Ñxed assets sub-ledger for one acquisition and thus omitted from the analysis performed in
connection with the preparation of our historical Ñnancial statements. Accordingly, an adjustment was made
in the restatement to properly include these assets as well.
Furthermore, we reduced the value of assets subject to replacement by a total of approximately
$1.2 billion to record the assets at estimated depreciated replacement cost at the date of acquisition. This
includes a $598 million reduction originally recorded in our previously issued Ñnancial statements and a
$627 million adjustment identiÑed as part of the restatement.
As a result of the items identiÑed above, we determined that depreciation expense was overstated by a
total of $413 million for the Ñrst three quarters of 2002, and $330 million and $119 million in the years ended
2001 and 2000, respectively. This resulted in net loss being overstated by a total of $192 million for the Ñrst
three quarters of 2002, and $146 million and $48 million for the years ended 2001 and 2000, respectively.
Deferred Tax Liabilities/Franchise Assets. Adjustments were made to record deferred tax liabilities
associated with the acquisition of various cable television businesses. These adjustments increased amounts
assigned to franchise assets by $1.4 billion with a corresponding increase in deferred tax liabilities of
$1.2 billion. The balance of the entry was recorded to equity and minority interest. In addition, as described
above, a correction was made to reduce amounts assigned in purchase accounting to assets identiÑed for
replacement over the three-year period of our rebuild and upgrade of our network. This reduced the amount
assigned to the network assets to be retained and increased the amount assigned to franchise assets by
approximately $627 million with a resulting increase in amortization expense for the years restated. Such
adjustments increased the impairment of franchises recognized in the Ñrst quarter of 2002 by $199 million
(before minority interest) and increased amortization expense by $130 million and $121 million for the years
ended December 31, 2001 and 2000, respectively. This resulted in net loss being understated by a total of
$71 million for the Ñrst three quarters of 2002, and $57 million and $49 million for the years ended 2001 and
2000, respectively.
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