Charter 2012 Annual Report Download - page 84

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- 9
service. Right-of-entry costs are generally deferred and amortized to amortization expense over the term of the agreement. Costs
related to borrowings are deferred and amortized to interest expense over the terms of the related borrowings.
Valuation of Long-Lived Assets
The Company evaluates the recoverability of long-lived assets to be held and used 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 2012, 2011 and 2010.
Derivative Financial Instruments
Gains or losses related to derivative financial instruments which qualify as hedging activities are recorded in accumulated other
comprehensive loss. For all other derivative instruments, if any, the related gains or losses are recorded in the statements of
operations. 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
2017, the difference between fixed and variable interest amounts calculated by reference to agreed-upon notional principal amounts.
The Company does not hold or issue any derivative financial instruments for trading purposes.
Revenue Recognition
Revenues from residential and commercial video, Internet and telephone services are recognized when the related services are
provided. Advertising sales are recognized at estimated realizable values in the period that the advertisements are broadcast. In
some cases, the Company coordinates the advertising sales efforts of other cable operators in a certain market and remits amounts
received from customers less an agreed-upon percentage to such cable operator. For those arrangements in which the Company
acts as a principal, the Company records the revenues earned from the advertising customer on a gross basis and the amount
remitted to the cable operator as an operating expense.
Fees imposed on Charter by various governmental authorities are passed through on a monthly basis to the Company’s customers
and are periodically remitted to authorities. Fees of $389 million, $388 million and $379 million for the years ended December 31,
2012, 2011 and 2010, respectively, are reported in video, telephone and commercial revenues, on a gross basis with a corresponding
operating expense because the Company is acting as a principal. Other taxes, such as sales taxes imposed on the Company's
customers collected and remitted to state and local authorities are recorded on a net basis because the Company is acting as an
agent in such situation.