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S-4
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORP filed this Form S-4 on 01/25/2000
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<PAGE>   470
 
             CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
                             (DOLLARS IN THOUSANDS)
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
GENERAL
 
     Charter Communications Holdings, LLC (Charter Holdings) owns and operates
cable television systems currently serving approximately 3.7 million customers.
Charter Holdings offers a full range of traditional cable television services
and has begun to offer digital cable television services, interactive video
programming and high-speed Internet access. Charter Holdings is a subsidiary of
Charter Communications Holding Company, LLC (Charter Holdco), which is a
subsidiary of Charter Communications, Inc. In November 1999, Charter
Communications, Inc. completed an initial public offering of the sale of 195.5
million shares of Class A common stock. Proceeds from the offering were used by
Charter Communications, Inc. to purchase membership units in Charter Holdco,
which is using the funds received from Charter Communications, Inc. for the
acquisition of additional cable television systems (See Note 8).
 
ORGANIZATION AND BASIS OF PRESENTATION
 
     Charter Holdings was formed in February 1999 as a wholly owned subsidiary
of Charter Investment, Inc. (Charter Investment) (formerly Charter
Communications, Inc.) Charter Investment, through its wholly owned subsidiary,
Charter Communications Properties Holdings, LLC (CCPH), commenced operations
with the acquisition of a cable television system on September 30, 1995.
 
     Effective December 23, 1998, through a series of transactions, Paul G.
Allen acquired approximately 94% of Charter Investment for an aggregate purchase
price of $2.2 billion, excluding $2.0 billion in debt assumed (the "Paul Allen
Transaction"). In conjunction with the Paul Allen Transaction, Charter
Investment acquired, for fair value from unrelated third parties 100% of the
interests it did not already own in CharterComm Holdings, LLC (CharterComm
Holdings) and CCA Group (comprised of CCA Holdings Corp., CCT Holdings Corp. and
Charter Communications Long Beach, Inc.), all cable television operating
companies, for $2.0 billion, excluding $1.8 billion in debt assumed. Charter
Investment previously managed and owned minority interests in these companies.
These acquisitions were accounted for using the purchase method of accounting,
and accordingly, results of operations of CharterComm Holdings and CCA Group are
included in the financial statements from the date of acquisition. In February
1999, Charter Investment transferred all of its cable television operating
subsidiaries to a wholly owned subsidiary of Charter Holdings, Charter
Communications Operating, LLC (Charter Operating). This transfer was accounted
for as a reorganization of entities under common control similar to a pooling of
interests.
 
     As a result of the change in ownership of CCPH, CharterComm Holdings and
CCA Group, Charter Holdings has applied push-down accounting in the preparation
of the consolidated financial statements. Accordingly, on December 23, 1998,
Charter Holdings increased its member's equity by $2.2 billion to reflect the
amounts paid by Paul G. Allen and Charter Investment. The purchase price was
allocated to assets acquired and liabilities assumed based on their relative
fair values, including amounts assigned to franchises of $3.6 billion. The
allocation of the purchase price is based, in part, on preliminary information
which is subject to adjustment upon obtaining complete appraisal and valuation
information of intangible assets. The valuation information is expected to be
finalized in the fourth quarter of 1999. Management believes that finalization
of the purchase price will not have a material impact on the results of
operations or financial position of Charter Holdings.
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