Charter 2009 Annual Report Download - page 77

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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-29
14. Fair Value Measurements
Financial Assets and Liabilities
The Company has estimated the fair value of its financial instruments as of December 31, 2009 and 2008 using
available market information or other appropriate valuation methodologies. Considerable judgment, however, is
required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented in
the accompanying consolidated financial statements are not necessarily indicative of the amounts the Company
would realize in a current market exchange.
The carrying amounts of cash, receivables, payables and other current assets and liabilities approximate fair value
because of the short maturity of those instruments.
The estimated fair value of the Company’ s debt at December 31, 2009 and 2008 are based on quoted market prices.
A summary of the carrying value and fair value of the Company’ s debt at December 31, 2009 and 2008 is as
follows:
Successor Predecessor
December 31, 2009 December 31, 2008
Carrying Fair Carrying Fair
Value Value Value Value
Debt
CCH II debt, Predecessor $ -- $ -- $ 2,455 $ 1,051
CCH II debt, Successor 2,092 2,086 -- --
CCO Holdings debt 812 816 796 505
Charter Operating debt 2,500 2,527 2,397 1,923
Credit facilities 7,918 8,000 8,596 6,187
The Company adopted new accounting guidance for fair value measurements and disclosures on its financial assets
and liabilities effective January 1, 2008, and has an established process for determining fair value. Fair value is
based upon quoted market prices, where available. If such valuation methods are not available, fair value is based
on internally or externally developed models using market-based or independently-sourced market parameters,
where available. Fair value may be subsequently adjusted to ensure that those assets and liabilities are recorded at
fair value. The Company’ s methodology may produce a fair value that may not be indicative of net realizable value
or reflective of future fair values, but the Company believes its methods are appropriate and consistent with other
market peers. The use of different methodologies or assumptions to determine the fair value of certain financial
instruments could result in a different fair value estimate as of the Company’ s reporting date.
The accounting guidance establishes a three-level hierarchy for disclosure of fair value measurements, based upon
the transparency of inputs to the valuation of an asset or liability as of the measurement date, as follows:
• Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or
liabilities in active markets.
• Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in
active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for
substantially the full term of the financial instrument.
• Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value
measurement.
Interest rate derivatives were valued at December 31, 2008 using a present value calculation based on an implied
forward LIBOR curve (adjusted for Charter Operating’ s credit risk) and were classified within level 2 of the
valuation hierarchy. The Company’ s interest rate derivatives were accounted for at fair value on a recurring basis
and totaled $411 million and had a weighted average interest pay rate of 4.93% at December 31, 2008.