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S-1/A
CHARTER COMMUNICATIONS, INC. /MO/ filed this Form S-1/A on 11/01/1999
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<PAGE>   691
                               TCI FALCON SYSTEMS
            (A COMBINATION OF CERTAIN ASSETS, AS DEFINED IN NOTE 1)
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Estimates
 
     The preparation of combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the combined financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
 
  Reclassifications
 
     Certain prior year amounts have been reclassified for comparability with
the 1998 presentation.
 
(4) INCOME TAXES
 
     The TCI Falcon Systems were included in the consolidated federal income tax
return of TCI. Income tax expense for the TCI Falcon Systems is based on those
items in the consolidated calculation applicable to the TCI Falcon Systems.
Intercompany tax allocation represents an apportionment of tax expense or
benefit (other than deferred taxes) among subsidiaries of TCI in relation to
their respective amounts of taxable earnings or losses. The payable or
receivable arising from the intercompany tax allocation is recorded as an
increase or decrease in amounts due to TCI. Deferred income taxes are based on
the book and tax basis differences of the assets and liabilities within the TCI
Falcon Systems. The income tax amounts included in the accompanying combined
financial statements approximate the amounts that would have been reported if
the TCI Falcon Systems had filed a separate income tax return.
 
     Income tax expense for the nine-month period ended September 30, 1998 and
for the years ended December 31, 1997 and 1996 consists of:
 

<TABLE>
<CAPTION>
                                                      CURRENT    DEFERRED     TOTAL
                                                      -------    --------    -------
                                                          (AMOUNTS IN THOUSANDS)
<S>                                                   <C>        <C>         <C>
Nine-month period ended September 30, 1998:
  Intercompany allocation...........................  $(1,825)   $    --     $(1,825)
  Federal...........................................       --     (2,778)     (2,778)
  State and local...................................       --       (625)       (625)
                                                      -------    -------     -------
                                                      $(1,825)   $(3,403)    $(5,228)
                                                      =======    =======     =======
Year ended December 31, 1997:
  Intercompany allocation...........................  $(1,487)   $    --     $(1,487)
  Federal...........................................       --     (5,862)     (5,862)
  State and local...................................     (140)    (1,319)     (1,459)
                                                      -------    -------     -------
                                                      $(1,627)   $(7,181)    $(8,808)
                                                      =======    =======     =======
Year ended December 31, 1996:
  Intercompany allocation...........................  $(1,620)   $    --     $(1,620)
  Federal...........................................       --     (4,032)     (4,032)
  State and local...................................      (86)      (501)       (587)
                                                      -------    -------     -------
                                                      $(1,706)   $(4,533)    $(6,239)
                                                      =======    =======     =======
</TABLE>

 
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