Charter 2012 Annual Report Download - page 82

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CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012, 2011 AND 2010
(dollars in millions, except share or per share data or where indicated)
F- 7
1. Organization and Basis of Presentation
Organization
Charter Communications, Inc. (“Charter”) is a holding company whose principal asset is a 100% common equity interest in Charter
Communications Holding Company, LLC (“Charter Holdco”). Charter owns cable systems through its subsidiaries, which are
collectively, with Charter, referred to herein as the “Company.”
The Company is a cable operator providing services in the United States. The Company offers to residential and commercial
customers traditional cable video programming, Internet services, and telephone services, as well as advanced video services such
as Charter OnDemand™, high definition television, and digital video recorder (“DVR”) service. The Company sells its cable
video programming, Internet, telephone, and advanced video services primarily on a subscription basis. The Company also sells
local advertising on cable networks and on the Internet and provides fiber connectivity to cellular towers.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”).
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Areas involving significant judgments
and estimates include capitalization of labor and overhead costs; depreciation and amortization costs; impairments of property,
plant and equipment, intangibles and goodwill; income taxes; contingencies and programming expense. Actual results could differ
from those estimates.
Certain prior year amounts have been reclassified to conform with the 2012 presentation.
2. Summary of Significant Accounting Policies
Consolidation
The accompanying consolidated financial statements include the accounts of Charter and its wholly owned subsidiaries. The
Company consolidates variable interest entities based upon evaluation of the Company’s power, through voting rights or similar
rights, to direct the activities of another entity that most significantly impact the entity’s economic performance; its obligation to
absorb the expected losses of the entity; and its right to receive the expected residual returns of the entity. All significant
intercompany accounts and transactions among consolidated entities have been eliminated.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. These
investments are carried at cost, which approximates market value. Cash and cash equivalents consist primarily of money market
funds and commercial paper. Restricted cash and cash equivalents consist of amounts held in escrow accounts pending final
resolution from the Bankruptcy Court (see Note 18).
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