Charter 2011 Annual Report Download - page 109

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CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011, 2010 AND 2009
(dollars in millions, except share or per share data or where indicated)
F- 25
13. Accounting for Derivative Instruments and Hedging Activities
The Company uses interest rate swap agreements to manage its interest costs and reduce the Company’s exposure to increases in
floating interest rates. The 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.
The Company does not hold or issue derivative instruments for speculative trading purposes. The Company has certain interest
rate derivative instruments that have been designated as cash flow hedging instruments. Such instruments effectively convert
variable interest payments on certain debt instruments into fixed payments. For qualifying hedges, realized derivative gains and
losses offset related results on hedged items in the consolidated statements of operations. The Company formally documents,
designates and assesses the effectiveness of transactions that receive hedge accounting.
The effect of derivative instruments on the Company’s consolidated balance sheets is presented in the table below:
Other long-term liabilities:
Fair value of interest rate derivatives designated as hedges
Accumulated other comprehensive loss:
Interest rate derivatives designated as hedges
Successor
December 31,
2011
$ 65
$(65)
2010
$ 57
$(57)
Changes in the fair value of interest rate agreements that are designated as hedging instruments of the variability of cash flows
associated with floating-rate debt obligations, and that meet effectiveness criteria are reported in accumulated other comprehensive
income (loss). The amounts are subsequently reclassified as an increase or decrease to interest expense in the same periods in
which the related interest on the floating-rate debt obligations affected earnings (losses).
The effect of derivative instruments on the Company’s consolidated statements of operations is presented in the table below.
Other income (expense), net:
Loss on interest rate derivatives not designated as
hedges or ineffective portion of hedges
Other comprehensive income (loss):
Loss on interest rate derivatives designated as
hedges (effective portion)
Amount of gain (loss) reclassified from
accumulated other comprehensive loss into interest
expense or reorganization items, net
Successor
Year Ended December 31,
2011
$ —
$(8)
$(39)
2010
$ —
$(57)
$(27)
One Month
Ended
December 31,
2009
$ —
$ —
$ —
Predecessor
Eleven
Months Ended
November 31,
2009
$(4)
$(9)
$ 275
As of December 31, 2011 and 2010 (Successor), the Company had $2.0 billion in notional amounts of interest rate swap agreements
outstanding. The notional amounts of interest rate instruments do not represent amounts exchanged by the parties and, thus, are
not a measure of exposure to credit loss. The amounts exchanged were determined by reference to the notional amount and the