Charter 2004 Annual Report Download - page 118

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES 2004 FORM 10-K
Notes to Consolidated Financial Statements (continued)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Franchises
Franchise rights represent the value attributed to agreements
with local authorities that allow access to homes in cable service
Cash Equivalents areas acquired through the purchase of cable systems. Manage-
The Company considers all highly liquid investments with ment estimates the fair value of franchise rights at the date of
original maturities of three months or less to be cash acquisition and determines if the franchise has a finite life or an
equivalents. These investments are carried at cost, which indefinite-life as defined by Statement of Financial Accounting
approximates market value. Standards (‘‘SFAS’’) No. 142, Goodwill and Other Intangible Assets.
All franchises that qualify for indefinite-life treatment under
Property, Plant and Equipment
SFAS No. 142 are no longer amortized against earnings but
Property, plant and equipment are recorded at cost, including all
instead are tested for impairment annually as of October 1, or
material, labor and certain indirect costs associated with the
more frequently as warranted by events or changes in circum-
construction of cable transmission and distribution facilities.
stances (see Note 7). The Company concluded that 99% of its
Costs associated with initial customer installations and the
franchises qualify for indefinite-life treatment; however, certain
additions of network equipment necessary to enable advanced
franchises did not qualify for indefinite-life treatment due to
services are capitalized. Costs capitalized as part of initial
technological or operational factors that limit their lives. These
customer installations include materials, labor, and certain
franchise costs are amortized on a straight-line basis over
indirect costs. Indirect costs are associated with the activities of
10 years. Costs incurred in renewing cable franchises are
the Company’s personnel who assist in connecting and activat-
deferred and amortized over 10 years.
ing the new service and consist of compensation and indirect
costs associated with these support functions. Indirect costs Other Noncurrent Assets
primarily include employee benefits and payroll taxes, direct Other noncurrent assets primarily include goodwill, deferred
variable costs associated with capitalizable activities, consisting financing costs, governmental securities and investments in
primarily of installation and construction vehicle costs, the cost equity securities. Costs related to borrowings are deferred and
of dispatch personnel and indirect costs directly attributable to amortized to interest expense over the terms of the related
capitalizable activities. The costs of disconnecting service at a borrowings.
customer’s dwelling or reconnecting service to a previously Investments in equity securities are accounted for at cost,
installed dwelling are charged to operating expense in the under the equity method of accounting or in accordance with
period incurred. Costs for repairs and maintenance are charged SFAS No. 115, Accounting for Certain Investments in Debt and
to operating expense as incurred, while plant and equipment Equity Securities. Charter recognizes losses for any decline in
replacement and betterments, including replacement of cable value considered to be other than temporary. Certain market-
drops from the pole to the dwelling, are capitalized. able equity securities are classified as available-for-sale and
Depreciation is recorded using the straight-line composite reported at market value with unrealized gains and losses
method over management’s estimate of the useful lives of the recorded as accumulated other comprehensive income or loss.
related assets as follows:
Cable distribution systems 7-20 years
Customer equipment and installations 3-5 years
Vehicles and equipment 1-5 years
Buildings and leasehold improvements 5-15 years
Furniture and fixtures 5 years
The following summarizes investment information as of and for the years ended December 31, 2004 and 2003:
Gain (loss) for
Carrying Value at the Years Ended
December 31, December 31,
2004 2003 2004 2003 2002
Equity investments, under the cost method $39 $30 $(3) $(2) $—
Equity investments, under the equity method 25 11 7(1) (5)
Marketable securities, at market value ———— 2
$64 $41 $4 $(3) $(3)
As required by the indentures to the Company’s approximately $144 million with maturities corresponding to the
5.875% convertible senior notes issued in November 2004, the interest payment dates for the convertible senior notes. These
Company purchased U.S. government securities valued at securities were pledged and are held in escrow to provide
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