AT&T Uverse 2007 Annual Report Download - page 64

Notes to Consolidated Financial Statements (continued)
Dollars in millions except per share amounts
62
| 2007 AT&T Annual Report
Adjustments were primarily related to valuation estimates
that, due to the proximity of the merger to year-end, were
based on data from periods prior to the close of the
December 29, 2006 acquisition. Using the December 29, 2006
data, purchase price allocations decreased the opening
balance sheet values of property, plant and equipment,
trademark/names and other intangibles, offset by an
increased value of licenses and customer lists and relation-
ships acquired. Deferred tax adjustments are associated
with the above-mentioned items.
Substantially all of the licenses acquired have an indefinite
life, and accordingly, are not subject to amortization. The
majority of customer relationship intangible assets are being
amortized over a weighted-average period of 6.4 years using
the sum-of-the-months-digits method. This method best
reflects the estimated pattern in which the economic benefits
will be consumed. Other intangible assets and other
noncurrent liabilities include lease and sublease contracts,
which are amortized over the remaining terms of the
underlying leases and have a weighted-average amortization
period of 6.4 years.
AT&T Corp. In November 2005, we acquired ATTC in a
transaction accounted for under FAS 141, issuing 632 million
shares. ATTC was one of the nation’s leading business service
communications providers, offering a variety of global
communications services, including large domestic and
multinational businesses, small and medium-size businesses
and government agencies, and operated one of the leading
telecommunications networks in the U.S. ATTC also provided
domestic and international long-distance and usage-based-
communications services to consumer customers. ATTC is now
a wholly-owned subsidiary of AT&T and the results of ATTC’s
operations have been included in our consolidated financial
statements after the November 18, 2005 acquisition date.
Under the purchase method of accounting, the transaction
was valued, for accounting purposes, at $15,517 and the
assets and liabilities of ATTC were recorded at their respective
fair values as of the date of the acquisition.
Other Acquisitions During 2007, we acquired Interwise®,
a global provider of voice, Web and video conferencing
services to businesses for $122 and Ingenio®, a provider
of Pay Per Call® technology for directory and local search
business for $195, net of cash. We recorded $304 of goodwill
related to these acquisitions.
During 2006, we acquired Comergent Technologies, Nistevo
Corporation and USinternetworking, Inc., for a combined
$500, recording $333 in goodwill. The acquisitions of these
companies are designed to enhance our service offerings for
Web hosting and application management. In January 2005,
we acquired Yantra Corporation (Yantra) for $169 in cash and
recorded goodwill of $98. Yantra is a provider of distributed
order management and supply-chain fulfillment services.
Dispositions
In May 2007, we sold to Clearwire Corporation (Clearwire),
a national provider of wireless broadband Internet access,
education broadband service spectrum and broadband radio
service spectrum valued at $300. Sale of this spectrum was
required as a condition to the approval of our acquisition of
BellSouth.
Valuation and Other Adjustments
As ATTC and BellSouth stock options that were converted
at the time of the respective acquisitions are exercised, the
tax effect on those options may further reduce goodwill.
During 2007, we recorded $9 in related goodwill reductions
for ATTC and $33 for BellSouth.
Included in the current liabilities reported on our
consolidated balance sheet are accruals established under
EITF Issue No. 95-3, “Recognition of Liabilities in Connection
with a Purchase Business Combination” (EITF 95-3). The
liabilities include accruals for severance, lease terminations
and equipment removal costs associated with our
acquisitions of ATTC and BellSouth.
Included in the liabilities valued for the December 2006
acquisition of BellSouth was accrued severance of $535 for
BellSouth employees and $44 for AT&T Mobility employees,
all of which will be paid from company cash. In addition,
we also reviewed, confirmed and developed plans affecting
the integration of retail stores, administrative space and
networks, including those acquired in AT&T Mobility’s
acquisition of AT&T Wireless Services, Inc. When these
acquisition plans were finalized during 2007, we recorded
additional accruals for severance, lease terminations and
equipment removal costs at AT&T Mobility.
Following is a summary of the accruals recorded at
December 31, 2006, cash payments made during 2007
and the purchase accounting adjustments thereto, for
the acquisitions of ATTC and BellSouth.
12/31/06 Cash Additional 12/31/07
Balance Payments Accruals Adjustments Balance
Severance accruals paid from:
Company funds $ 986 $(417) $ 42 $ (71) $ 540
Pension and postemployment benefit plans 183 (54) — — 129
Lease terminations 146 (149) 422 6 425
Equipment removal and other related costs 117 (125) 214 (45) 161
Total $1,432 $(745) $678 $(110) $1,255