Time Warner Inc. (TWX)

Investment Accounting Policy

Investments in companies in which Time Warner has significant influence, but less than a controlling voting interest, are accounted for using the equity method. Significant influence is generally presumed to exist when Time Warner owns between 20% and 50% of a voting interest in the investee, holds substantial management rights or holds an interest of less than 20% in an investee that is a limited liability partnership or limited liability corporation that is treated as a flow-through entity.

Under the equity method of accounting, only Time Warner's investment in and amounts due to and from the equity investee are included in the Consolidated Balance Sheet; only Time Warner's share of the investee's earnings (losses) is included in the Consolidated Statement of Operations; and only the dividends, cash distributions, loans or other cash received from the investee, additional cash investments, loan repayments or other cash paid to the investee are included in the Consolidated Statement of Cash Flows. Additionally, the carrying value of investments accounted for using the equity method of accounting is adjusted downward to reflect any other-than-temporary declines in value.

Investments in companies in which Time Warner does not have a controlling interest or over which it is unable to exert significant influence are generally accounted for at market value if the investments are publicly traded. If the investment or security is not publicly traded, the investment is accounted for at cost. Unrealized gains and losses on investments accounted for at market value are reported, net of tax, in Accumulated other comprehensive loss, net, until the investment is sold or considered impaired, at which time the realized gain or loss is included in Other loss, net. Dividends and other distributions of earnings from both market-value investments and investments accounted for at cost are included in Other loss, net, when declared.

Source: Time Warner Inc., Annual Report

Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities

Time Warner Inc., adjustment to Net Income (loss) Attributable To Time Warner Inc. Shareholders

USD $ in millions

12 months ended	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
Net income (loss) attributable to Time Warner Inc. shareholders (as reported)	3,019	2,886	2,578	2,468	(13,402)
Add: Net gains (losses) on securities	1	4	(1)	(12)	(18)
Net income (loss) attributable to Time Warner Inc. shareholders (adjusted)	3,020	2,890	2,577	2,456	(13,420)

Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)

Time Warner Inc., adjusted ratios

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
Net Profit Margin
Reported net profit margin	10.51%	9.96%	9.59%	9.57%	-28.52%
Adjusted net profit margin	10.51%	9.97%	9.58%	9.52%	-28.56%
Return on Equity (ROE)
Reported ROE	10.10%	9.63%	7.83%	7.39%	-31.69%
Adjusted ROE	10.11%	9.65%	7.82%	7.36%	-31.73%
Return on Assets (ROA)
Reported ROA	4.42%	4.26%	3.88%	3.75%	-11.77%
Adjusted ROA	4.42%	4.26%	3.87%	3.74%	-11.78%

Ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	Time Warner Inc.'s adjusted net profit margin improved from 2010 to 2011 and from 2011 to 2012.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by shareholders' equity.	Time Warner Inc.'s adjusted ROE improved from 2010 to 2011 and from 2011 to 2012.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by total assets.	Time Warner Inc.'s adjusted ROA improved from 2010 to 2011 and from 2011 to 2012.

Adjusted Net Profit Margin

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
As Reported
Net income (loss) attributable to Time Warner Inc. shareholders (USD $ in millions)	3,019	2,886	2,578	2,468	(13,402)
Revenues (USD $ in millions)	28,729	28,974	26,888	25,785	46,984

Net profit margin¹	10.51%	9.96%	9.59%	9.57%	-28.52%
Adjusted: Mark to Market Available-for-sale Securities
Adjusted net income (loss) attributable to Time Warner Inc. shareholders (USD $ in millions)	3,020	2,890	2,577	2,456	(13,420)
Revenues (USD $ in millions)	28,729	28,974	26,888	25,785	46,984

Adjusted net profit margin²	10.51%	9.97%	9.58%	9.52%	-28.56%

2012 Calculations

¹ Net profit margin = 100 × Net income (loss) attributable to Time Warner Inc. shareholders ÷ Revenues
= 100 × 3,019 ÷ 28,729 = 10.51%

² Adjusted net profit margin = 100 × Adjusted net income (loss) attributable to Time Warner Inc. shareholders ÷ Revenues
= 100 × 3,020 ÷ 28,729 = 10.51%

Ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	Time Warner Inc.'s adjusted net profit margin improved from 2010 to 2011 and from 2011 to 2012.

Adjusted Return On Equity (ROE)

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
As Reported
Net income (loss) attributable to Time Warner Inc. shareholders (USD $ in millions)	3,019	2,886	2,578	2,468	(13,402)
Total Time Warner Inc. shareholders' equity (USD $ in millions)	29,877	29,957	32,940	33,383	42,288

ROE¹	10.10%	9.63%	7.83%	7.39%	-31.69%
Adjusted: Mark to Market Available-for-sale Securities
Adjusted net income (loss) attributable to Time Warner Inc. shareholders (USD $ in millions)	3,020	2,890	2,577	2,456	(13,420)
Total Time Warner Inc. shareholders' equity (USD $ in millions)	29,877	29,957	32,940	33,383	42,288

Adjusted ROE²	10.11%	9.65%	7.82%	7.36%	-31.73%

2012 Calculations

¹ ROE = 100 × Net income (loss) attributable to Time Warner Inc. shareholders ÷ Total Time Warner Inc. shareholders' equity
= 100 × 3,019 ÷ 29,877 = 10.10%

² Adjusted ROE = 100 × Adjusted net income (loss) attributable to Time Warner Inc. shareholders ÷ Total Time Warner Inc. shareholders' equity
= 100 × 3,020 ÷ 29,877 = 10.11%

Ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by shareholders' equity.	Time Warner Inc.'s adjusted ROE improved from 2010 to 2011 and from 2011 to 2012.

Adjusted Return On Assets (ROA)

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
As Reported
Net income (loss) attributable to Time Warner Inc. shareholders (USD $ in millions)	3,019	2,886	2,578	2,468	(13,402)
Total assets (USD $ in millions)	68,304	67,801	66,524	65,730	113,896

ROA¹	4.42%	4.26%	3.88%	3.75%	-11.77%
Adjusted: Mark to Market Available-for-sale Securities
Adjusted net income (loss) attributable to Time Warner Inc. shareholders (USD $ in millions)	3,020	2,890	2,577	2,456	(13,420)
Total assets (USD $ in millions)	68,304	67,801	66,524	65,730	113,896

Adjusted ROA²	4.42%	4.26%	3.87%	3.74%	-11.78%

2012 Calculations

¹ ROA = 100 × Net income (loss) attributable to Time Warner Inc. shareholders ÷ Total assets
= 100 × 3,019 ÷ 68,304 = 4.42%

² Adjusted ROA = 100 × Adjusted net income (loss) attributable to Time Warner Inc. shareholders ÷ Total assets
= 100 × 3,020 ÷ 68,304 = 4.42%

Ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by total assets.	Time Warner Inc.'s adjusted ROA improved from 2010 to 2011 and from 2011 to 2012.