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GRAHAM HOLDINGS CO filed this Form 10-K on 03/29/1994
Entire Document
<PAGE>   31
                          THE WASHINGTON POST COMPANY

                             NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS


The Washington Post Company ("the company") operates principally in four areas
of the media business: newspaper publishing, television broadcasting, magazine
publishing and cable television. Segment data is set forth in Note M.

FISCAL YEAR. The company reports on a 52-53 week fiscal year ending on the
Sunday nearest December 31. The fiscal year 1993, which ended on January 2,
1994, included 52 weeks, while 1992 included 53 weeks and 1991 included 52
weeks. With the exception of the newspaper publishing operations, subsidiaries
of the company report on a calendar-year basis.

PRINCIPLES OF CONSOLIDATION. The accompanying financial statements include the
accounts of the company and its subsidiaries; significant intercompany
transactions have been eliminated.

CASH EQUIVALENTS. Short-term investments with maturities of 90 days or less are
considered cash equivalents. The carrying amount approximates fair value.

MARKETABLE SECURITIES. Marketable securities consist of debt instruments that
mature over 90 days from the purchase date and are stated at cost plus accrued
interest, which approximates fair value.

INVENTORIES. Inventories are valued at the lower of cost or market. Cost of
newsprint is determined by the first-in, first-out method, and cost of magazine
paper is determined by the specific-cost method.

INVESTMENTS IN AFFILIATES. The company uses the equity method of accounting for
its investments in and earnings and losses of affiliates.

PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment is recorded at
cost and includes interest capitalized in connection with major long-term
construction projects. Replacements and major improvements are capitalized;
maintenance and repairs are charged to operations as incurred.
    Depreciation is calculated using the straight-line method over the
estimated useful lives of the property, plant and equipment: 3 to 12 years for
machinery and equipment, 20 to 50 years for buildings and 5 to 20 years for
land improvements. The costs of leasehold improvements are amortized over the
lesser of the useful lives or the terms of the respective leases.

GOODWILL AND OTHER INTANGIBLES. Goodwill and other intangibles represent the
unamortized excess of the cost of acquiring subsidiary companies over the fair
values of such companies' net tangible assets at the dates of acquisition.
Goodwill and other intangibles acquired prior to October 30, 1970, the
effective date of Accounting Principles Board Opinion No. 17, are not being
amortized because in the opinion of the company there has been no diminution of
the value of such assets. Goodwill and other intangibles acquired subsequently
are being amortized by use of the straight-line method over various periods up
to 40 years.

DEFERRED PROGRAM RIGHTS. The broadcast subsidiaries are parties to agreements
that entitle them to show motion pictures and syndicated programs on
television. The unamortized cost of these rights and the liability for future
payments under these agreements are included in the Consolidated Balance
Sheets. The unamortized cost is charged to operations using accelerated
amortization rates for motion pictures and accelerated or straight-line rates
for syndicated programs.

Deferred subscription revenue, which primarily represents amounts received from
customers in advance of magazine and newspaper deliveries, is included in
revenues over the subscription term.  Deferred subscription revenue to be
earned after one year is included in "Other liabilities" in the Consolidated
Balance Sheets.  Subscription procurement costs are charged to operations as

INCOME TAXES. The 1993 provision for income taxes has been determined under
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS No. 109), which requires the use of the asset and liability
approach. Under this approach, deferred taxes represent the expected future tax
consequences of temporary differences between the carrying amount and tax basis
of assets and liabilities.
    Prior to 1993, the provision for income taxes was determined under
Accounting Principles Board (APB) Opinion No. 11, which required use of the
deferred method. Under that method, the provision for income taxes was based on
pretax financial income, which differed from taxable income because certain
elements of income and expense were reflected in different periods for