Charter 2009 Annual Report Download - page 63

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CCH II, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2009, 2008, AND 2007
(dollars in millions, except where indicated)
F-15
Asset Retirement Obligations
Certain of the Company’ s franchise agreements and leases contain provisions requiring the Company to restore
facilities or remove equipment in the event that the franchise or lease agreement is not renewed. The Company
expects to continually renew its franchise agreements and has concluded that substantially all of the related franchise
rights are indefinite lived intangible assets. Accordingly, the possibility is remote that the Company would be
required to incur significant restoration or removal costs related to these franchise agreements in the foreseeable
future. A liability is required to be recognized for an asset retirement obligation in the period in which it is incurred
if a reasonable estimate of fair value can be made. The Company has not recorded an estimate for potential
franchise related obligations, but would record an estimated liability in the unlikely event a franchise agreement
containing such a provision were no longer expected to be renewed. The Company also expects to renew many of
its lease agreements related to the continued operation of its cable business in the franchise areas. For the
Company’ s lease agreements, the estimated liabilities related to the removal provisions, where applicable, have been
recorded and are not significant to the financial statements.
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 finite life or an indefinite-life. All
franchises that qualify for indefinite-life treatment are tested for impairment annually or more frequently as
warranted by events or changes in circumstances (see Note 6). The Company concluded that substantially all of its
franchises qualify for indefinite-life treatment.
Customer Relationships
Customer relationships represent the value attributable to the Company’ s business relationships with its current
customers including the right to deploy and market additional services to these customers. Customer relationships
are amortized on an accelerated basis over the period the relationships are expected to generate cash flows.
Goodwill
The Company assesses the recoverability of its goodwill annually, or more frequently whenever events or changes in
circumstances indicate that the asset might be impaired. The Company performs the assessment of its goodwill one
level below the operating segment level, which is represented by geographical groupings of cable systems by which
such systems are managed.
Other Noncurrent Assets
Other noncurrent assets primarily include other intangible assets as of December 31, 2009 and deferred financing
costs and other intangible assets as of December 31, 2008. Costs related to borrowings are deferred and amortized
to interest expense over the terms of the related borrowings. All prior deferred financing costs were eliminated as
part of fresh start accounting.
Valuation of Long-Lived Assets
The Company evaluates the recoverability of long-lived assets to be held and used for impairment when events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Such events or
changes in circumstances could include such factors as impairment of the Company’ s indefinite life assets, changes
in technological advances, fluctuations in the fair value of such assets, adverse changes in relationships with local
franchise authorities, adverse changes in market conditions or a deterioration of operating results. If a review
indicates that the carrying value of such asset is not recoverable from estimated undiscounted cash flows, the
carrying value of such asset is reduced to its estimated fair value. While the Company believes that its estimates of
future cash flows are reasonable, different assumptions regarding such cash flows could materially affect its
evaluations of asset recoverability. No impairments of long-lived assets to be held and used were recorded in 2009,