AT&T Wireless 2006 Annual Report Download - page 58

56 : : 2006 AT&T Annual Report
Notes to Consolidated Financial Statements (continued)
Dollars in millions except per share amounts
The following table summarizes the preliminary estimated
fair values of the BellSouth assets acquired and liabilities
assumed and related deferred income taxes as of acquisition
date. Included in the liabilities assumed at the acquisition was
$535 for accrued severance.
BellSouth
Assets acquired
Current assets $ 4,875
Property, plant and equipment 18,498
Intangible assets not subject to amortization
Trademark/name 330
Licenses 214
Intangible assets subject to amortization
Customer lists and relationships 9,230
Patents 100
Trademark/name 211
Investment in AT&T Mobility 32,759
Other investments 2,446
Other assets 11,211
Goodwill 26,467
Total assets acquired 106,341
Liabilities assumed
Current liabilities, excluding current
portion of long-term debt 5,288
Long-term debt 15,628
Deferred income taxes 10,318
Postemployment benefit obligation 7,086
Other noncurrent liabilities 1,223
Total liabilities assumed 39,543
Net assets acquired $ 66,798
Goodwill of $26,467 resulting from the acquisition of Bell-
South was assigned to the other segment. In addition,
BellSouth’s investment in AT&T Mobility’s and YPC’s goodwill
was recorded as a result of this acquisition. However, as part
of the final valuation of the acquisition, we will determine to
which reporting units and to what extent the benefit of the
acquisition applies, and as required by GAAP, record the
appropriate goodwill to each reporting unit. Goodwill includes
a portion of value for assembled workforce which is not
separately classified from goodwill in accordance with FAS
141. The purchased intangibles and goodwill are not deduct-
ible for tax purposes. However, purchase accounting allows for
the establishment of deferred tax liabilities on purchased
intangibles (other than goodwill), which will be reflected as a
tax benefit on our future Consolidated Statements of Income
in proportion to and over the amortization period of the
related intangible asset.
Substantially all of the licenses acquired have an indefinite
life, and accordingly, are not subject to amortization. The
customer relationship intangible assets will be amortized
over the following weighted periods using the sum-of-the-
months-digits method of amortization: 5 years for consumer
customers, 9.6 years for business customers and 7 years for
directory customers. This sum-of-the-months-digits method of
amortization best reflects the estimated pattern in which the
economic benefits will be consumed.
BellSouth’s 40% economic ownership of AT&T Mobility has
been recorded above as “Investment in AT&T Mobility,” and
has been eliminated in our Consolidated Balance Sheets. We
have recorded the consolidation of AT&T Mobility as a step
acquisition, retaining 60% of AT&T Mobility’s prior book value
and adjusting the remaining 40% to fair value as shown below.
AT&T Mobility
60% at 40% at
Book Fair
Value Value Total
Assets acquired
Current assets $ 4,218 $ 2,770 $ 6,988
Property, plant and equipment 14,118 5,569 19,687
Intangible assets not
subject to amortization
Licenses 15,952 18,027 33,979
Intangible assets subject
to amortization
Customer lists and
relationships 1,028 6,555 7,583
Trademark/name 7 336 343
Other 79 97 176
Other assets 439 647 1,086
Goodwill 13,078 14,351 27,429
Total assets acquired 48,919 48,352 97,271
Liabilities assumed
Current liabilities, excluding
current portion of
long-term debt 4,224 2,790 7,014
Intercompany debt 5,504 3,539 9,043
Long-term debt 7,570 4,989 12,559
Deferred income taxes 2,298 3,161 5,459
Postemployment benefit
obligation 163 138 301
Other noncurrent liabilities 1,031 976 2,007
Total liabilities assumed 20,790 15,593 36,383
Net assets acquired $28,129 $32,759 $60,888
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 noncur-
rent 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.