AT&T Wireless 2009 Annual Report Download - page 70

Notes to Consolidated Financial Statements (continued)
Dollars in millions except per share amounts
68 AT&T 09 AR
at the balance sheet dates. We translate our share of their
revenues and expenses using average rates during the year.
The resulting foreign currency translation adjustments are
recorded as a separate component of accumulated other
comprehensive income in the accompanying consolidated
balance sheets. We do not hedge foreign currency translation
risk in the net assets and income we report from these
sources. However, we do hedge a large portion of the
foreign currency exchange risk involved in anticipation of
highly probable foreign currency-denominated transactions,
which we explain further in our discussion of our methods
of managing our foreign currency risk (see Note 9).
NOTE 2. ACQUISITIONS, DISPOSITIONS, AND
OTHER ADJUSTMENTS
Acquisitions
Centennial In November 2009, we acquired the assets
of Centennial, a regional provider of wireless and wired
communications services with approximately 865,000
customers as of December 31, 2009. Total consideration of
$2,961 included $955 in cash for the redemption of
Centennial’s outstanding common stock and liquidation of
outstanding stock options and $2,006 for our acquisition of
Centennial’s outstanding debt (including liabilities related to
assets subject to sale, as discussed below), of which we repaid
$1,957 after closing in 2009. The preliminary fair value
measurement of Centennial’s net assets at the acquisition
date resulted in the recognition of $1,276 of goodwill, $647
of spectrum licenses, and $273 of customer lists and other
intangible assets for the Wireless segment. The Wireline
segment added $339 of goodwill and $174 of customer lists
and other intangible assets from the acquisition. The
acquisition of Centennial impacted our Wireless and Wireline
segments, and we have included Centennial’s operations in
our consolidated results since the acquisition date. As the
value of certain assets and liabilities are preliminary in nature,
they are subject to adjustment as additional information is
obtained about the facts and circumstances that existed at
the acquisition date. When the valuation is final, any changes
to the preliminary valuation of acquired assets and liabilities
could result in adjustments to identified intangibles and
goodwill. See Notes 6 and 8 for additional information
regarding the impact of the Centennial acquisition on our
goodwill and other intangibles and our long-term debt
repayment for 2009.
Wireless Properties Transactions In May 2009, we
announced a definitive agreement to acquire certain wireless
assets from Verizon Wireless (VZ) for approximately $2,350
in cash. The assets primarily represent former Alltel Wireless
assets. We will acquire wireless properties, including
licenses and network assets, serving approximately
1.5 million subscribers in 79 service areas across 18 states.
In October 2009, the Department of Justice (DOJ) cleared
our acquisition of Centennial, subject to the DOJ’s condition
that we divest Centennial’s operations in eight service areas
in Louisiana and Mississippi. We are in the process of
amount of the original estimate of undiscounted cash flows
are recognized. The increase in the carrying value of the
associated long-lived asset is depreciated over the
corresponding estimated economic life.
Software Costs It is our policy to capitalize certain costs
incurred in connection with developing or obtaining internal-
use software. Capitalized software costs are included in
“Property, Plant and Equipment” on our consolidated balance
sheets and are primarily amortized over a three-year period.
Software costs that do not meet capitalization criteria are
expensed immediately.
Goodwill and Other Intangible Assets Goodwill
represents the excess of consideration paid over the fair value
of net assets acquired in business combinations. Goodwill
and other indefinite-lived intangible assets are not amortized
but are tested at least annually for impairment. We have
completed our annual goodwill impairment testing for 2009,
which did not result in an impairment.
Intangible assets that have finite useful lives are amortized
over their useful lives, a weighted-average of 8.1 years.
Customer relationships are amortized using primarily the
sum-of-the-months-digits method of amortization over the
expected period in which those relationships are expected
to contribute to our future cash flows based in such a way as
to allocate it as equitably as possible to periods during which
we expect to benefit from those relationships.
A significant portion of intangible assets in our Wireless
segment are Federal Communications Commission (FCC)
licenses that provide us with the exclusive right to utilize
certain radio frequency spectrum to provide wireless
communications services. While FCC licenses are issued for a
fixed time (generally 10 years), renewals of FCC licenses have
occurred routinely and at nominal cost. Moreover, we have
determined that there are currently no legal, regulatory,
contractual, competitive, economic or other factors that limit
the useful lives of our FCC licenses, and therefore the FCC
licenses are indefinite-lived intangible assets under the
GAAP standards for goodwill and other intangible assets.
In accordance with GAAP, we test wireless FCC licenses
for impairment on an aggregate basis, consistent with the
management of the business on a national scope. During the
fourth quarter of 2009, we completed the annual impairment
tests for indefinite-lived wireless FCC licenses. These annual
impairment tests resulted in no material impairment of
indefinite-lived wireless FCC licenses. We recorded an
immaterial $18 impairment to wireline licenses we no
longer plan to use.
Advertising Costs Advertising costs for advertising
products and services or for promoting our corporate image
are expensed as incurred.
Foreign Currency Translation We are exposed to
foreign currency exchange risk through our foreign affiliates
and equity investments in foreign companies. Our foreign
subsidiaries and foreign investments generally report their
earnings in their local currencies. We translate our share of
their foreign assets and liabilities at exchange rates in effect