AT&T Wireless 2007 Annual Report Download - page 63

2007 AT&T Annual Report
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balance sheet, adjusting 100% of BellSouth’s and 40% of AT&T
Mobility’s values. Long-lived assets such as property, plant and
equipment reflect a value of replacing the assets, which takes
into account changes in technology, usage, and relative
obsolescence and depreciation of the assets, sometimes
referred to as a “Greenfield approach.” This approach often
results in differences, sometimes material, from recorded book
values even if, absent the acquisition, the assets would not be
impaired. In addition, assets and liabilities that would not
normally be recorded in ordinary operations (i.e., customer
relationships) were recorded at their acquisition values.
Debt instruments and investments were valued in relation
to current market conditions and other assets and liabilities
were valued based on the acquiring company’s estimates.
After all values were assigned to assets and liabilities, the
remainder of the purchase price was recorded as goodwill.
The following table summarizes the preliminary estimated
fair values of the BellSouth assets acquired and liabilities
assumed and related deferred income taxes as of the
acquisition date and final adjustments made thereto.
BellSouth Purchase
Price Allocation
As of Adjust- As of
12/31/06 ments 12/29/07
Assets acquired
Current assets $ 4,875 $ 6 $ 4,881
Property, plant and equipment 18,498 225 18,723
Intangible assets not subject
to amortization:
Trademark/name 330 — 330
Licenses 214 100 314
Intangible assets subject
to amortization:
Customer lists and
relationships 9,230 (25) 9,205
Patents 100 — 100
Trademark/name 211 — 211
Investments in AT&T Mobility 32,759 2,039 34,798
Other investments 2,446 (3) 2,443
Other assets 11,211 (168) 11,043
Goodwill 26,467 (1,554) 24,913
Total assets acquired 106,341 620 106,961
Liabilities assumed
Current liabilities, excluding
current portion of
long-term debt 5,288 (427) 4,861
Long-term debt 15,628 (4) 15,624
Deferred income taxes 10,318 (89) 10,229
Postemployment benefit
obligation 7,086 163 7,249
Other noncurrent liabilities 1,223 941 2,164
Total liabilities assumed 39,543 584 40,127
Net assets acquired $ 66,798 $ 36 $ 66,834
Adjustments were primarily related to finalization of participant
count estimates used in the opening balance sheet valuation
for the pension and postretirement plans, a gain on a
contingency related to an insurance claim recovery for
Hurricane Katrina damages, AT&T Mobility’s purchase
accounting adjustments and tax impacts related thereto,
the valuation of certain licenses and a decrease in the
estimate of relative obsolescence of property, plant and
equipment resulting in an increase in value and longer
average remaining economic life. Deferred tax adjustments
are associated with the above-mentioned items.
BellSouth’s 40% economic ownership of AT&T Mobility
was recorded above as “Investment in AT&T Mobility” and
was eliminated on our consolidated balance sheets.
We 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. The following
table summarizes the preliminary estimated fair values
(40%) and historical book values (60%) of the AT&T Mobility
assets acquired and liabilities assumed and related deferred
income taxes as of the acquisition date and final adjustments
made thereto.
Fair Value Adjustments
AT&T Mobility
As of Adjust- As of
12/31/06 ments 12/29/07
Assets acquired
Current assets $ 6,988 $ (1) $ 6,987
Property, plant and equipment 19,687 (569) 19,118
Intangible assets not subject
to amortization:
Licenses 33,979 887 34,866
Intangible assets subject
to amortization:
Customer lists and
relationships 7,583 479 8,062
Trademark/names 343 (127) 216
Other 176 (44) 132
Other assets 1,086 13 1,099
Goodwill 27,429 1,989 29,418
Total assets acquired 97,271 2,627 99,898
Liabilities assumed
Current liabilities, excluding
current portion of
long-term debt 7,014 647 7,661
Intercompany debt 9,043 — 9,043
Long-term debt 12,559 — 12,559
Deferred income taxes 5,459 (1) 5,458
Postemployment benefit
obligation 301 93 394
Other noncurrent liabilities 2,007 (106) 1,901
Total liabilities assumed 36,383 633 37,016
Net assets acquired $60,888 $1,994 $62,882