Charter 2010 Annual Report Download - page 93

                                         
F- F-PB
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010, 2009, AND 2008
(dollars in millions, except share or per share data or where indicated)
with the construction of cable transmission and distribution
facilities. While the Company’s capitalization is based on specific
activities, once capitalized, costs are tracked by fixed asset category
at the cable system level and not on a specific asset basis. For assets
that are sold or retired, the estimated historical cost and related
accumulated depreciation is removed. Costs associated with initial
customer installations and the additions of network equipment
necessary to enable advanced video services are capitalized. Costs
capitalized as part of initial customer installations include materials,
labor, and certain indirect costs. Indirect costs are associated with
the activities of the Company’s personnel who assist in connecting
and activating the new service and consist of compensation and
other costs associated with these support functions. Indirect costs
primarily include employee benefits and payroll taxes, direct variable
costs associated with capitalizable activities, consisting primarily
of installation and construction vehicle costs, the cost of dispatch
personnel and indirect costs directly attributable to capitalizable
activities. e costs of disconnecting service at a customer’s dwelling
or reconnecting service to a previously installed dwelling are charged
to operating expense in the period incurred. Costs for repairs and
maintenance are charged to operating expense as incurred, while
plant and equipment replacement and betterments, including
replacement of cable drops from the pole to the dwelling, are
capitalized.
Depreciation is recorded using the straight-line composite method over
management’s estimate of the useful lives of the related assets as follows:
Cable distribution systems 7-20 years
Customer equipment and installations 4-8 years
Vehicles and equipment 1-6 years
Buildings and leasehold improvements 15-40 years
Furniture, fixtures and equipment 6-10 years
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. e 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. e
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. e 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 5). e Company concluded that
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 with current customers are expected to generate cash
flows (11-15 years).
Goodwill
e Company assesses the recoverability of its goodwill as of
November 30 of each year, or more frequently whenever events or
changes in circumstances indicate that the asset might be impaired.
e 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 trademarks and deferred
financing costs as of December 31, 2010 and trademarks as of
December 31, 2009. Costs related to borrowings are deferred
and amortized to interest expense over the terms of the related