Charter 2011 Annual Report Download - page 93

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- 9
account established in bankruptcy proceedings was used to pay for professional services for the year ended December 31, 2010
(Successor).
Property, Plant and Equipment
Additions to property, plant and equipment are recorded at cost, including all material, labor and certain indirect costs associated
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. The 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
Customer equipment and installations
Vehicles and equipment
Buildings and leasehold improvements
Furniture, fixtures and equipment
7-20 years
4-8 years
1-6 years
15-40 years
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. The Company expects to continually renew its
franchise agreements and has concluded that 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 or authorizations with local and state authorities that allow access to
homes in cable service areas. 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). The Company has concluded that
all of its existing 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).