Costs incurred in obtaining and renewing cable franchises are deferred and
amortized over the lives of the franchises. Costs relating to unsuccessful
franchise applications are charged to expense when it is determined that the
efforts to obtain the franchise will not be successful. Franchise rights
acquired through the purchase of cable systems represent management's best
estimate of fair value and generally are amortized using the straight-line
method over a period of up to 15 years. The period of 15 years is management's
best estimate of the useful lives of the franchises and assumes substantially
all of those franchises that expire during the period will be renewed by the
Debt issuance costs are being amortized to interest expense over the term of the
related debt. The interest rate cap costs are being amortized over the terms of
the agreement, which approximates three years.
IMPAIRMENT OF ASSETS
If the facts and circumstances suggest that a long-lived asset may be impaired,
the carrying value is reviewed. If a review indicates that the carrying value of
such asset is not recoverable based on projected undiscounted cash flows related
to the asset over its remaining life, the carrying value of such asset is
reduced to its estimated fair value.
Cable television revenues from basic and premium services are recognized when
the related services are provided.
Installation revenues are recognized to the extent of direct selling costs
incurred. The remainder, if any, is deferred and amortized to income over the
average estimated period that customers are expected to remain connected to the
cable television system. In 1998, no installation revenue was deferred, as
direct selling costs have exceeded installation revenue.
Fees collected from programmers to guarantee carriage are deferred and amortized
to income over the life of the contracts. Local governmental authorities impose
franchise fees on the Company ranging up to a federally mandated maximum of 5.0%
of gross revenues. On a monthly basis, such fees are collected from the
Company's customers and are periodically remitted to local franchises. Franchise
fees collected and paid are reported as revenues.
INTEREST RATE HEDGE AGREEMENTS
The Company manages fluctuations in interest rates by using interest rate hedge
agreements, as required by certain debt agreements. Interest rate swaps, caps
and collars are accounted for as hedges of debt obligations, and accordingly,
the net settlement amounts are recorded as adjustments to interest expense in
the period incurred. Premiums paid for interest rate caps are deferred, included
in other assets, and are amortized over the original term of the interest rate
agreement as an adjustment to interest expense.
The Company's interest rate swap agreements require the Company to pay a fixed
rate and receive a floating rate thereby creating fixed rate debt. Interest rate
caps and collars are entered into by the Company to reduce the impact of rising
interest rates on floating rate debt.
The Company's participation in interest rate hedging transactions involves
instruments that have a close correlation with its debt, thereby managing its
risk. Interest rate hedge agreements have been designed for hedging purposes and
are not held or issued for speculative purposes.
The Company files a consolidated income tax return with Charter Investment.
Income taxes are allocated to the Company in accordance with the tax-sharing
agreement between the Company and Charter Investment.