AT&T Wireless 2008 Annual Report Download - page 59

AT&T Annual Report 2008
| 57
We record changes in the fair value of fair value hedges,
along with the changes in the fair value of the hedged
asset or liability that is attributable to the hedged risk.
Gains or losses upon termination of our fair value hedges
are recognized as interest expense when the hedge
instrument is settled.
We record changes in the fair value of cash flow hedges,
along with the changes in the fair value of the hedged
asset or liability that is attributable to the hedged risk, in
“Accumulated other comprehensive income,” which is a
component of Stockholders’ Equity. This includes the foreign
currency contracts noted above. The settlement gains or
costs on our cash flow hedges are amortized as interest
expense over the term of the interest payments of the
related debt issuances.
Changes in the fair value of undesignated derivatives are
recorded in other income (expense), net, along with the change
in fair value of the underlying asset or liability, as applicable.
Cash flows associated with derivative instruments are
presented in the same category on the consolidated
statements of cash flows as the item being hedged.
When hedge accounting is discontinued, the derivative is
adjusted for changes in fair value through other income
(expense), net. For fair value hedges, the underlying asset or
liability will no longer be adjusted for changes in fair value,
and any asset or liability recorded in connection with the
hedging relationship (including firm commitments) will be
removed from the balance sheet and recorded in current-
period earnings. For cash flow hedges, gains and losses
that were accumulated in other comprehensive income as
a component of stockholders’ equity in connection with
hedged assets or liabilities or forecasted transactions will
be recognized in other income (expense) – net, in the same
period the hedged item affects earnings.
Employee Separations In accordance with Statement
of Financial Accounting Standards No. 112, “Employers’
Accounting for Postemployment Benefits,” (FAS 112) we
establish obligations for expected termination benefits
provided under existing plans to former or inactive employees
after employment but before retirement. These benefits
include severance payments, workers’ compensation,
disability, medical continuation coverage and other benefits.
At December 31, 2008, we had severance accruals under
FAS 112 of $752. At December 31, 2007, we had severance
accruals of $127.
Pension and Postretirement Benefits See Note 11 for a
comprehensive discussion of our pension and postretirement
benefit expense, including a discussion of the actuarial
assumptions.
NOTE 2. ACQUISITIONS, DISPOSITIONS, VALUATION AND
OTHER ADJUSTMENTS
Acquisitions
Dobson In November 2007, we acquired Dobson
Communications Corporation (Dobson) for approximately
$2,500. Under the purchase method of accounting, the
transaction was valued, for accounting purposes, at $2,580.
Our December 31, 2007 consolidated balance sheet included
the preliminary valuation of the fair value of Dobson’s assets
and liabilities, including goodwill of $2,623, licenses of $2,230,
customer lists of $517 and other intangible assets totaling $8
associated with this transaction. Final adjustments to the
preliminary valuation included an increase to goodwill of $990,
a decrease in licenses of $781 and a decrease in customer
lists of $12. The resulting balances are $3,613 for goodwill,
$1,449 for licenses and $505 for customer lists. Adjustments
were primarily related to changes in the valuation of certain
licenses and an increase in the estimate of relative
obsolescence of property, plant and equipment resulting in
a decrease in value and shorter average remaining economic
life, and an adjustment to the value of the markets included
in the divestiture order by the FCC. Pursuant to the order, we
exchanged certain properties, spectrum and $355 in cash for
other licenses and properties. Deferred tax adjustments are
associated with the above-mentioned items. Dobson marketed
wireless services under the Cellular One brand and had
provided roaming services to AT&T subsidiaries since 1990.
Dobson had 1.7 million subscribers across 17 states. Dobson’s
operations were incorporated into our wireless operations
following the date of acquisition.
BellSouth Corporation In December 2006, we acquired
BellSouth under FAS 141, issuing 2.4 billion shares.
BellSouth was the leading communications service provider
in the southeastern U.S., providing wireline communications
services, including local exchange, network access, long-
distance services and Internet services to substantial
portions of the population across nine states. BellSouth
also provided long-distance services to enterprise customers
throughout the country.
We and BellSouth jointly owned AT&T Mobility and the
Internet-based publisher YELLOWPAGES.COM (YPC). In the
AT&T Mobility joint venture, we held a 60% economic interest
and BellSouth held a 40% economic interest, and in the YPC
joint venture, we held a 66% economic interest and BellSouth
held a 34% economic interest. For each joint venture, control
was shared equally. We and BellSouth each accounted for
the joint ventures under the equity method of accounting,
recording the proportional share of AT&T Mobility’s and
YPC’s income as equity in net income of affiliates on the