Charter 2012 Annual Report Download - page 87

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- 12
4. Property, Plant and Equipment
Property, plant and equipment consists of the following as of December 31, 2012 and 2011:
December 31,
2012 2011
Cable distribution systems $ 6,588 $ 5,916
Customer equipment and installations 3,292 2,592
Vehicles and equipment 195 136
Buildings and leasehold improvements 342 318
Furniture, fixtures and equipment 352 299
10,769 9,261
Less: accumulated depreciation (3,563)(2,364)
$ 7,206 $ 6,897
The Company periodically evaluates the estimated useful lives used to depreciate its assets and the estimated amount of assets
that will be abandoned or have minimal use in the future. A significant change in assumptions about the extent or timing of future
asset retirements, or in the Company’s use of new technology and upgrade programs, could materially affect future depreciation
expense.
Depreciation expense for the years ended December 31, 2012, 2011 and 2010 was $1.4 billion, $1.3 billion, and $1.2 billion,
respectively. Property, plant and equipment increased $49 million as a result of cable system acquisitions during the year ended
December 31, 2011.
5. Franchises, Goodwill and Other Intangible Assets
Franchise rights represent the value attributed to agreements or authorizations with local and state authorities that allow access to
homes in cable service areas. For valuation purposes, they are defined as the future economic benefits of the right to solicit and
service potential customers (customer marketing rights), and the right to deploy and market new services, such as Internet and
telephone, to potential customers (service marketing rights).
Franchise assets are tested for impairment annually, or more frequently as warranted by events or changes in circumstances.
Franchise assets are aggregated into essentially inseparable units of accounting to conduct valuations. The units of accounting
have historically represented geographical clustering of our cable systems into groups by which such systems were managed. In
2012, as a result of changes to the Company's organizational structure, the evolution of competition in the industry, and changes
in the regulatory environment, the Company concluded that the highest and best use of its franchise assets is at the consolidated
level and as such combined its units of accounting into one unit as of November 30, 2012. As required by the accounting guidance
on testing indefinite-lived intangible assets for impairment, the Company tested its franchise assets first based on the prior units
of accounting before testing the new unit of accounting. No impairment was identified based on the new or prior units of accounting.
During 2012, the Company early adopted Accounting Standards Update ("ASU") No. 2012-02, Testing Indefinite Lived Intangible
Assets for Impairment. This new standard gives the Company the option to first assess qualitative factors to determine whether
the existence of events or circumstances leads to a determination that it is more likely than not that an indefinite lived intangible
asset has been impaired. If, after this qualitative assessment, the Company determines that it is not more likely than not that an
indefinite lived intangible asset has been impaired, then no further quantitative testing is necessary. In completing the 2012
impairment testing of both the prior units of accounting and the new unit of accounting, the Company elected to perform this
qualitative assessment. As such, the Company evaluated the impact of various factors to the expected future cash flows attributable
to each of its units of accounting and to the assumed discount rate used to present value those cash flows. Such factors included
macro-economic and industry conditions including the capital markets, regulatory, and competitive environment, and costs of