Charter 2010 Annual Report Download - page 94

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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)
borrowings. All deferred financing costs prior to emergence were
eliminated as part of fresh start accounting. Trademarks have been
determined to have an indefinite life and are tested annually for
impairment.
Valuation of Long-Lived Assets
e 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 2010, 2009 and 2008.
Derivative Financial Instruments
Gains or losses related to derivative financial instruments which
qualify as hedging activities are recorded in accumulated other
comprehensive income (loss). For all other derivative instruments,
the related gains or losses are recorded in the statements of
operations. e Company uses interest rate swap agreements to
manage its interest costs and reduce the Company’s exposure to
increases in floating interest rates. e Company manages its
exposure to fluctuations in interest rates by maintaining a mix of
fixed and variable rate debt. Using interest rate swap agreements, the
Company agrees to exchange, at specified intervals through 2015, the
difference between fixed and variable interest amounts calculated by
reference to agreed-upon notional principal amounts. e Company
did not hold any derivative financial instruments as of December 31,
2009, as upon filing for Chapter 11 bankruptcy, the counterparties to
the interest rate swap agreements terminated the underlying contracts
and upon emergence from bankruptcy, received payment for the
market value of the interest rate swap as measured on the date the
counterparties terminated. In April 2010, the Company entered into
$2.0 billion notional amounts of interest rate swap agreements.
For the year ended December 31, 2008 (Predecessor), the Company
recognized a gain of $33 million, related to certain provisions of
the Company’s 5.875% and 6.50% convertible senior notes issued
in November 2004 and October 2007, respectively, which were
considered embedded derivatives for accounting purposes and were
required to be accounted for separately from the convertible senior
notes. ese derivatives were marked to market with gains or losses
recorded as the change in value of derivatives on the Company’s
consolidated statements of operations. On the Effective Date,
the Company’s 5.875% and 6.50% convertible senior notes were
cancelled. See Note 23.