University of Mississippi

eGrove
American Institute of Certified Public Accountants
Statements of Position
(AICPA) Historical Collection

1979

Accounting by cable television companies :

proposal to the Financial Accounting Standards
Board; Statement of position 79-2;
American Institute of Certified Public Accountants. Accounting Standards Division

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American Institute of Certified Public Accountants. Accounting Standards Division, "Accounting by cable television companies :
proposal to the Financial Accounting Standards Board; Statement of position 79-2;" (1979). Statements of Position. 8.
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Statement of 79-2
Position

Accounting by Cable
Television Companies

March 12, 1979

Proposal to the
Financial Accounting Standards Board

Issued by
Accounting Standards Division

American Institute of
Certified Public Accountants AICPA
Copyright © 1979 by the
American Institute of Certified Public Accountants, Inc.
1211 Avenue of the Americas, New York, N.Y. 10036

NOTE
Statements of position of the accounting standards division are issued
for the general information of those interested in the subject. They
present the conclusions of at least a majority of the accounting stan-
dards executive commitee, which is the senior technical body of the
Institute authorized to speak for the Institute in the areas of financial
accounting and reporting and cost accounting.
The objective of statements of position is to influence the develop-
ment of accounting and reporting standards in directions the division
believes are in the public interest. It is intended that they should be
considered, as deemed appropriate, by bodies having authority to issue
pronouncements on the subject. However, statements of position do
not establish standards enforceable under the Institute's code of
professional ethics.
 Table of Contents
Page

Introduction 5

General Background 5

Current Industry Accounting Practices 8

Cable TV Investment 8
Franchise Costs 10
Hookup Revenue 11

The Division's Conclusions 11

Accounting During the Prematurity
Period of a Cable TV System 11
Recoverability 12
Prematurity Period 12
Cost of Physical Facilities 13
Period Costs 13
Other Capitalizable Costs 13
Capitalization and Depreciation Formula 14
Revenues 14
Interest During Construction 15
Segmentation 15
Purchased Franchises and Goodwill 16
Depreciation and Amortization 17
Hookup Revenue 17
Programming Material 18
Accounting Principles for Regulated Industries 18
Financial Statement Presentation 18
Transition 19
 Accounting Standards Division
Accounting Standards Executive Committee
(1977-1978)
ARTHUR R . W Y A T T , Chairman L A V E R N O . JOHNSON
D E N N I S R . BERESFORD ROBERT G . MCLENDON
MICHAEL P . BOHAN THOMAS I. MUELLER
ROGER CASON THOMAS J . O ' R E I L L Y
CHARLES CHAZEN JOHN O . REINHARDT
JOEL W . CHEMERS L E W I S E . ROSSITER
WILLIAM C. DENT EDWARD J . SILVERMAN
O B A T . HANNA, J R .

Task Force on Entertainment Companies

R O B E R T G . MCLENDON, Chairman ALAN M A Y , J R .
JOHN F A R R E L L FRANK SPEARMAN I I I
CHARLES JOHNSON L E O STRAUSS
HAROLD KASSEL ROBERT E . WANKEL
J E R O M E LOWENGRUB FINIS WILLIAMS

AICPA Staff
PAUL ROSENFIELD, Director SUESAN R . C A T L E T T , Assistant
Accounting Standards Manager, Accounting Standards
 Accounting by Cable
Television Companies
Introduction
1. Cable television (CATV) companies have developed di-
verse specialized industry accounting practices over a period of
years, with the result that their financial statements lack com-
parability. This statement of position summarizes CATV compa-
nies' current specialized industry accounting practices. A study
of those accounting practices by the AICPA Accounting Stan-
dards Division indicates a need for clarification and narrowing of
alternative accounting practices within the industry.

General Background
2. Cable television systems receive television signals, which
are amplified and distributed to the premises of subscribers, usu-
ally over a community-wide coaxial cable distribution network.
The signals originate from local and distant television broadcast-
ing stations and are received by the CATV system by means of
high antennas, microwave relay, or satellite. CATV systems may
also distribute programs that originate in the systems. "Pay cable"
service, consisting primarily of uncut and uninterrupted movies
and sporting events, has been initiated relatively recently but is
already generally available.

3. CATV systems typically distribute signals of the three na-

tional TV networks and, to the extent permitted by Federal Com-
munications Commission regulations, signals of independent and
educational TV stations (UHF and VHF) and FM radio stations.
The systems generally have a capacity of twelve to twenty TV
channels, although some newer systems provide more. Many
CATV systems require the attachment of a converter to the sub-
scriber's set.

4. The copyright law (Public Law 94-553) defines a cable TV

system as follows.

5
 A "cable system" is a facility, located in any state, territory, trust
territory, or possession, that in whole or in part receives signals
transmitted or programs broadcast by one or more television
broadcast stations licensed by the FCC, and makes secondary
transmission of such signals or programs by wires, cables, or other
communication channels to subscribing members of the public
who pay for such services.

5. The copyright law requires cable systems to pay royalty fees

computed on the basis of specified percentages of the gross re-
ceipts from subscribers to the cable service for the basic service
of secondary transmission.

6. For operational and accounting purposes, a cable TV system

may include one or more communities and may operate under
one or more franchises granted by the governing authorities of
the city, county, or state served by the system. Franchises are for
a stated term and contain various conditions and limitations,
which frequently include prescribed maximum service subscrip-
tion fees, payment of fees to the local government, conditions of
service, including provision of a minimum number of channels,
and time limitations on specified construction. Failure to comply
with the conditions and limitations of a franchise may give the
granting authority the right to terminate the franchise and may
result in lawsuits for collection of damages.

7. The cable TV plant required to render service to the sub-

scriber includes the following equipment:

a. Head-end—includes the equipment used to receive signals of

distant TV or radio stations, whether directly from the air-
waves or from a microwave relay system. It also includes the
studio facilities required for operator-originated programming,
if any.
b. Cable—consists of cable (in the past, usually coaxial cable) and
amplifiers (which maintain the quality of the signal) covering
the subscriber area, either on utility poles or underground.
c. Drops—consist of the hardware that provides access to the
main cable, the short length of cable that brings the signal
from the main cable to the subscriber's TV set, and other asso-
ciated hardware, which may include a trap to block particular
channels.

6
d. Converters and descramblers—devices attached to the sub-
scribers' TV sets when more than twelve channels are provided
or when special services are provided, such as "pay cable" or
two-way communication.

8. The construction period of a cable TV system varies with the

size of the franchise area, density of population, and difficulty of
physical construction. The construction period is not completed
until the head-end main cable and distribution cables are in-
stalled, and includes a reasonable time to provide for installation
of subscriber drops and related hardware. During the construction
period many system operators complete installation of drops and
begin to provide service to some subscribers in some parts of the
system while construction continues. Providing the signal for the
first time is referred to as "energizing" the system. The period from
the first earned subscriber revenue until the end of this construc-
tion period is referred to as the "prematurity period" in subsequent
sections of this statement. Some system operators will construct
the better portions of the franchise area and allow the system's
operations to develop before extending it, well after the end of the
first major construction period, to more marginal areas.

9. Special circumstances in different franchises will require

different planning; the variety of plans would include the follow-
ing typical franchise development and construction plans:

a. Small franchise, characterized by the absence of free television

signal. The construction period is short and the entire system is
energized at one time near the end of the construction period.
b. Medium-size franchise, characterized by some direct competi-
tion from free television and a more extensive geographical
franchise area lending itself to incremental construction, with
some parts of the system energized as construction progresses.
c. Large metropolitan franchise, characterized by heavy direct
competition from free television and fringe area signal inade-
quacy, high cost, and difficult construction, with many parts of
the system energized as construction progresses.

The length of the prematurity period varies with these circum-

stances and with the company's construction plan. It might range
from less than a month to six months in a small marketing area

7
with under 5,000 homes, one year in a medium-size area of 25,000
to 30,000 homes, or two years or more in a large urban market.

10. A substantial investment is required to provide for the fol-

lowing costs of a cable TV system:

a. Franchise acquisition costs.

b. Cost of physical facilities (see paragraph 7), including cost of
labor for erection, installation, interest on construction in prog-
ress, and construction overhead.
c. Costs relating to the cable TV system and signal, such as in-
terest on previously capitalized costs, property taxes, pole ren-
tal, and microwave charges, which may be incurred both be-
fore and after the first subscriber hookup.
d. Other operating costs (in excess of any revenues) incurred
during the construction period and before sufficient subscrib-
ers are obtained to achieve break-even operations.
If the franchise requires underground construction, construction
costs and investment are substantially increased.

11. Cable TV operators lease space on telephone or utility poles

or in underground ducts. Pole attachment agreements typically
have an initial term of one to five years and thereafter are termin-
able by either party on relatively short notice.

12. The principal source of cable TV revenue is the monthly

subscription fee for primary connections to subscribers. Additional
revenues are received (a) from subscribers for secondary con-
nections and connection charges, (b) from the sale of local adver-
tising or from leasing time on unused channels, and (c) from pay
cable services.

Current industry Accounting Practices

Cable TV Investment
13. The cost of materials, labor, and construction overhead is
included in the cost of the cable TV plant. Cable TV companies
have not uniformly capitalized interest during construction. How-
ever, the predominant practice among cable TV companies whose
securities are publicly held has been to capitalize interest during

8
construction and to include the capitalized costs in cable TV plant
costs. Depreciation of new cable TV plant is usually computed
using the straight-line method over periods that vary from ten to
fifteen years.

14. Initial subscriber installation costs, which include the ma-

terial, labor, and overhead costs of the drop, are capitalized and
depreciated over periods similar to or shorter than those used for
cable TV plant. The costs of subsequently disconnecting and re-
connecting subscribers typically are charged to expense. In addi-
tion, some companies have received revenues of the nature of
payments in aid of construction from developers and have credited
such amounts to the plant account.

15. Except in the smallest systems, it is usually possible to

deliver programming to portions of the system (energize the sys-
tem) and obtain some revenues before construction of the entire
system is complete. Thus, virtually every cable TV system experi-
ences a prematurity period during which it is receiving some rev-
enue while continuing to incur substantial costs related to the
establishment of the total system. In general, the larger the city
served by the cable TV system, the longer this period will be.

16. Many different methods are used to account for costs and
revenues during this prematurity period, although virtually all
companies whose securities are publicly held defer such costs in
some manner. Practices followed in accumulating the net costs
deferred vary widely. Some companies defer all costs, including
general and administrative, before maturity; some companies defer
only operating costs; others defer only certain specified costs.
Some companies depreciate cable TV plant during this period and
others do not. Some reduce the deferred costs by the revenues
recorded and others do not. Finally, although deferred costs are
subject to a recoverability test, recoverability is measured in dif-
ferent ways.

17. Accounting conventions for the determination of the ma-

turity date, at which time deferral ceases and amortization of
deferred costs begins, vary significantly within the industry. Some
companies define maturity on the basis of the time elapsed since
energizing the system, which varies from eighteen months to three
years; others define maturity in terms of the number of subscribers

9
connected; and still others use break-even operations as maturity.
The break-even point is sometimes determined on a cash basis
and sometimes on an accrual basis. Some companies use the actual
break-even point and others use the originally budgeted break-
even point.

18. Deferred costs are usually amortized on the straight-line

method (a) over periods of five to ten years or (b) over the esti-
mated useful life of the cable TV system.

19. Some companies separately defer marketing costs during

the period before maturity and amortize them over a shorter
period, such as three years.

Franchise Costs
20. The costs of original franchise applications are generally
deferred until the franchise has been granted and it is determined
that the franchise will be developed. Costs of unsuccessful fran-
chise applications and abandoned franchises are charged to ex-
pense. Costs of successful applications are amortized on bases
similar to those for purchased franchises (paragraph 22).

21. Purchased franchises are accounted for in diverse ways.

Some companies allocate costs to purchased franchises in propor-
tion to their fair value. Others allocate any excess of acquisition
cost over the fair value of tangible and other identifiable intangible
assets acquired, less liabilities assumed, to franchises. Some treat
the excess as the cost of franchises and goodwill without separate
distinction, and others treat the excess as goodwill alone.

22. Some companies do not amortize the cost of franchises

acquired before November 1, 1970. The costs of franchises ac-
quired on or after November 1, 1970, have been amortized, in
accordance with APB Opinion 17, over periods of up to forty
years. However, periods as short as five to ten years are also used;
they are usually related to the remaining franchise term. The
straight-line method of amortization is generally used, although
other methods can be found in practice. For example, amortization
may be based on the ratio of subscribers served in the period to
the estimated total number of subscribers to be served in each
year during the amortization period.

10
Hookup Revenue
23. Companies engage in various marketing activities to obtain
subscribers, some of which involve relatively expensive advertising
efforts. The amounts charged by cable TV companies to sub-
scribers for hookups vary; sometimes there is a substantial charge,
sometimes there is none. Also, the revenues are accounted for in
diverse ways. Many companies record them as subscriber rev-
enues; others record them as an offset to marketing costs. In either
event, companies believe hookup revenue to be incidental, either
because it is often waived as part of a promotional campaign, or
because it relates more to the marketing effort involved than to the
costs of hooking up new subscribers. During the early stages of
system development, companies record hookup revenue as a re-
duction of deferred costs.

The Division's Conclusions

Accounting During the Prematurity Period
of a Cable TV System
24. The accounting standards division believes that recovery of
the investment in a cable TV system (paragraph 10) is usually
predictable and, accordingly, that costs incurred during construc-
tion before the first subscriber hookup may be capitalized. In
addition, since major construction activity normally continues
after the first subscriber hookup, a portion of certain costs relating
to the cable TV system and signal should usually continue to be
capitalized. Furthermore, the division believes that the most theo-
retically appropriate, systematic, and rational allocation of capi-
talized plant would result from a computation that attempts to
approximate depreciation on the basis of total "subscriber months"
over the life of a system. For example, if a system were expected to
have an average of 1,000 subscribers over its 180-month deprecia-
tion life and had achieved 300 subscribers, current monthly depre-
ciation would be 300/180,000 of the cost of the system.

25. The following paragraphs contain the division's recommen-

dations for conforming accounting practice within the industry
while implementing the general conclusions in paragraph 24 in a
practical manner:

Recoverability (paragraph 26).

Prematurity period (paragraph 27).

11
 Cost of physical facilities (paragraph 28).
Period costs (paragraph 29).
Other capitalizable costs (paragraph 30).
Capitalization and depreciation formula (paragraphs 31-32).
Revenues (paragraph 33).

These recommendations recognize the appropriateness of capitali-

zation of certain costs and of lower than straight-line depreciation
during the prematurity period, but, for practical reasons, they do
not permit inclusion in the depreciation base of increases in esti-
mated subscribers expected to occur after the prematurity period.
Thus, in the example in paragraph 24, average number of sub-
scribers is to be calculated using subscribers expected at the end
of the prematurity period for all years after that date.

26. Recoverability. An overriding consideration in reflecting

incurred costs as assets is the expectation of recovery. Accordingly,
circumstances must indicate that expected revenues from a cable
TV system will be sufficient to cover expected operating expenses,
including amortization of intangible assets and depreciation of
plant. Otherwise, no additional costs should be capitalized, and
an evaluation should be made to determine if a write-down to
recoverable values (through operations or sale of the system)
of intangible assets and previously capitalized plant is indicated.

27. Prematurity Period. Before the first earned subscriber rev-

enue, management must determine a prematurity period for pur-
poses of determining capitalized costs, depreciation, and amorti-
zation. This period begins with the first earned subscriber rev-
enue. Its end will vary with circumstances at the system, but will
be determined based on the company's plans for completion of
its first major construction period (paragraphs 8 and 9) or
achievement of a specific predetermined subscriber level at which
no additional cash investments will be required for other than
physical facilities and interest. Information submitted to the divi-
sion indicates that there should be a presumption that the period
should not be longer than two years, and that it will frequently
be shorter. Only in the largest major urban markets could a longer
period be reasonably justified. Once determined, the prematurity

12
period should not be changed except under highly unusual cir-
cumstances. Inability of management to make a reasonable esti-
mate of the prematurity period is likely to indicate either an
extremely short period or uncertainty of recovery. In either case,
additional costs should not be capitalized.

28. Cost of Physical Facilities. Nothing in this statement (other

than the discussion of lack of recoverability in paragraph 26 and
the discussion of interest during construction in paragraphs 34-
35) is intended to suggest that construction costs of physical fa-
cilities, including direct labor and construction overhead, should
not be capitalized in full during and after the prematurity period.

29. Period Costs. During the prematurity period, subscriber-

related costs and selling, marketing, and administrative expenses
should be accounted for as period costs and should not be con-
sidered for capitalization. Such costs include those relating to
existing subscribers such as billing and collection, bad debts, and
mailings; costs of repairs and maintenance of taps and connec-
tions; franchise fees related to revenues or number of subscribers;
general and administrative system costs such as salaries of the
system manager and office rent; programming costs for additional
channels used in the marketing effort or costs related to revenues
from, or number of subscribers to, per channel or per program
service; and direct selling costs (paragraph 43).

30. Other Capitalizable Costs. During the prematurity period,

the cable TV system is partially under construction and partially
servicing current operations. Management must distinguish be-
tween costs of physical facilities (paragraph 28), costs attribut-
able solely to current operations and their administration (para-
graph 29), and the generally fixed costs relating to the cable TV
system and signal, which are attributable to both current and
future operations. The last category includes interest (paragraphs
34-35) on previously capitalized tangible and intangible costs;
property taxes based on valuation as a fully operating system;
pole, underground duct, antenna site and microwave rental; and
local origination programming to satisfy franchise requirements.

13
The division of these costs between costs capitalized and costs
expensed should be determined as described in paragraphs 31
and 32.

31. Capitalization and Depreciation Formula. Based on the

plans described in paragraph 27, management should estimate the
number of subscribers expected during each month of the pre-
maturity period. During the prematurity period, costs attributable
to both current and future operations (paragraph 30) should be
charged to expense in an amount equal to the fraction of average
subscribers expected during each month to total subscribers ex-
pected at the end of the prematurity period; only the balance
should be capitalized. During the same period, depreciation
should be computed as the foregoing fraction applied to monthly
depreciation and amortization of total anticipated capitalized
costs expected on completion of the prematurity period, using the
straight-line or other depreciation method normally applied by
the company after the prematurity period.

32. The division believes that an objective upper limit to the

costs capitalized and a lower limit on depreciation charged under
the formula in paragraph 31 is necessary to ensure that excessive
costs are not capitalized and adequate depreciation is provided.
Accordingly, the division believes that the estimated number of
subscribers during each month of the prematurity period should
reflect, on a cumulative basis, at least equal (that is, straight-line)
monthly progress in adding new subscribers toward the estimate
at the end of the period. Furthermore, monthly amounts charged
to expense should be increased whenever it becomes clear that the
actual number of subscribers is increasing at a rate faster than
expected.

33. Revenues. During the prematurity period, all revenues

except those from hookups (paragraph 43) should be reported
as system revenues, and the portion of costs, depreciation, and
amortization charged to expense under the formula described in
paragraphs 31 and 32 as well as the period costs described in
paragraph 29 should be included in appropriate categories of
costs of services.

14
Interest During Construction
34. In November 1974, the Securities and Exchange Commis-
sion issued Accounting Series Release 163, which, broadly speak-
ing, precludes adoption of the practice of capitalizing interest
during construction by companies, other than public utilities,
registered with the SEC. The Financial Accounting Standards
Board is currently considering the matter of accounting for interest
costs and any pronouncement issued is expected to be applicable
to cable television companies.

35. The accounting standards division believes that because of

FASB's pending consideration of accounting for interest costs, it
should state no conclusion at this time on the general subject of
interest capitalization. However, companies that do not capitalize
interest before energizing should not do so in subsequent periods
(paragraphs 24 through 33).

Segmentation
36. In certain cases, a portion of a cable TV system may be
clearly distinguishable from the remainder of the system.1 Such a
portion would have most of the following characteristics:

a. Geographical differences, such as coverage of a noncontiguous

or separately awarded franchise area.
b. Mechanical differences, such as a separate head-end.
c. Timing differences, such as starting construction or marketing
at a significantly later date.
d. Investment decision differences, such as separate break-even
and return-on-investment analyses or separate approval of the
start of construction.
e. Accountability differences, such as separate revenue and ex-
pense accounts and separate budgets and forecasts.

37. The division believes that a portion that can be clearly dis-
tinguished from the remainder of the system should be accounted

1 Some cable television companies have used the word "segment" to refer to a
portion of a cable TV system. In view of the use of "segment" in a different
context in FASB Statement no. 14, the word "portion" has been used here.

15
for as a separate system. Costs incurred by the remainder of the
system should be charged to the portion only if they are specific-
ally identified with the operations of that portion. General alloca-
tions should not be used for purposes of determining portion pre-
maturity costs that may be capitalized in accordance with the
recommendations made elsewhere in this statement. Separate pro-
jections for the portion should be developed and the portion's
capitalized costs should be evaluated for recoverability separately
from the remainder of the system.

Purchased Franchises and Goodwill

38. When a cable TV system is acquired in a transaction ac-
counted for as a purchase, values should be assigned to franchises
and goodwill in accordance with APB Opinion 16 and amortized
in accordance with APB Opinion 17. The following examples indi-
cate the types of analysis appropriate for cost allocation and amor-
tization.

a. If a single system is acquired, the values of franchise costs and

goodwill ordinarily would not be separable and therefore
would be assigned the same life.
b. If a company that operates multiple systems is acquired, the
several franchises acquired will have various remaining terms
and prospects for renewal, and the franchises may provide for
different allowable rates to be charged for the monthly service
as well as other different conditions and limitations. The value
of an amortization period for each franchise would have to be
determined separately. Any excess of the cost of the acquired
company over the sum of the amounts assigned to identifiable
assets acquired (including individual franchises) less liabilities
assumed should be recorded as goodwill related to the entire
operation. The amortization period for this goodwill would be
determined independently of the various franchise lives.

39. Intangible assets other than franchises and goodwill may

be identified in the purchase of some cable TV systems. For ex-
ample, values may be ascribed to noncancelable exclusive agree-
ments for sporting events, to subscriber lists, or to a rate below
current market for pole rental. Such assets should also be amor-
tized in accordance with the provisions of APB Opinion 17.

16
Depreciation and Amortization
40. Since costs incurred to bring a cable system to a fully
operational status create a resource with a period of expected ben-
efit not substantially different from the useful life of the physical
facilities, the division believes that the amortization period for
such costs should be the same as that used to depreciate the main
cable TV distribution system.

41. A number of factors are involved in determining the proper

lives for depreciation and amortization purposes. These factors
include the legal franchise life, the economic useful life of the
main cable television plant, and the accounting life of the main
cable television plant. If the accounting life used is longer than the
legal franchise life, there should be justification to support the
conclusion that the unamortized assets will be recovered at the end
of the franchise. Support for such a conclusion would include but
not be limited to the ability to recover the net book value on
disposal or the likely renewal of the system's franchise; the latter
could be either on terms similar to or different from the original
franchise. If the terms of a likely franchise renewal are expected
to cause a significant diminution in value to the owner of the
system, the original franchise life should be used for amortization
of other assets.

42. Once the system is fully operational, it should continue to

be reviewed for recoverability as described in paragraph 26.

Hookup Revenue
43. The division believes that hookup revenue should be allo-
cated to systems revenue to the extent of direct selling costs, with
any balance deferred and taken into income over the estimated
average period that subscribers are expected to remain connected
to the system.

44. Direct selling costs include commissions, the portion of

salespersons' compensation other than commissions that results in
obtaining subscribers, and costs of processing documents relating
to new subscribers acquired. They should not include supervisory
and administrative expenses or indirect expenses such as rent and
facilities costs.

17
 45. The cost of a subscriber connection made at a location
where a previous customer had been connected to the system
should be charged to expense unless the cost of the previous con-
nection has been written off.

Programming Material
46. The costs of programming material produced for internal
use or for sale to others should be accounted for in accordance
with the provisions of the AICPA Industry Accounting Guide,
Accounting for Motion Picture Films. Purchased program material
should be accounted for in accordance with the recommendations
made in the division's Statement of Position 75-5, Accounting
Practices in the Broadcasting Industry.

Accounting Principles for Regulated Industries

47. Some states have adopted legislation that regulates CATV
systems as public utilities. Cable TV systems are similar to utilities
only in that they require heavy plant investment, service by "con-
nection" for each subscriber, and are subject (in varying degrees)
to regulation of subscription rates and levels of service required to
maintain their franchise rights. Other aspects of cable TV systems
are not similar to public utilities. There has been no identifiable
consistency in the application of the rate-making process for cable
TV systems; the procedures for setting utility rates, on the other
hand, are similar in nature. Finally, since the operator competes
with other entertainment industries, service charges sometimes are
less than the authorized rates.

48. The division believes that the addendum to APB Opinion 2

does not apply to the financial statements of cable TV companies.

Financial Statement Presentation

49. Since a cable TV company generates its revenue through
use of its property, plant, and equipment, it has few current assets
as that expression is defined in terms of a one-year operating cycle.
Therefore, the division believes that it is not necessary to identify
current assets and liabilities separately in the financial statements.
Debt maturities should be disclosed in the financial statements or
related notes.

18
 50. Costs incurred to bring a cable TV system to a fully opera-
tional status that are capitalized under the provisions of para-
graphs 24 to 33 should be classified with plant and equipment, but
separately identified. Companies with systems under construction
or in the prematurity period should disclose amounts capitalized
during the reporting period and the ending date of the prematurity
period.

Transition
51. This statement of position should be applied in financial
statements for fiscal years beginning after December 15, 1978,
although earlier application is encouraged. Accounting changes
adopted to apply the recommendations of this statement of posi-
tion should be made retroactively by restating the financial state-
ments of prior periods.

52. Companies may not have readily available the forecast

information needed to make the required calculations under para-
graphs 24-33. In that event, actual historical subscriber data may
be substituted for the forecast information.

53. Companies that do not expect to have systems in the pre-

maturity period in the future should continue their previous
method of accounting for already mature systems, in accordance
with APB Opinion 20, paragraph 16. For example, a single locally
owned system, the owners of which expect to make no investments
in additional cable TV systems, should not change its previous ac-
counting. Systems that are subsidiaries or divisions of multiple
system groups, however, should follow the accounting recom-
mended for the group.

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