Clearwire 2010 Annual Report Download - page 60

Our long-lived assets, consisting of PP&E and definite-lived intangible assets such as subscriber relationships
and our spectrum licenses in the United States, are combined into a single asset group for purposes of testing
impairment because management believes that utilizing these assets as a group represents the highest and best use of
the assets and is consistent with the management’s strategy of utilizing our spectrum licenses on an integrated basis
as part of our nationwide network. Internationally, our long-lived assets, consisting of PP&E, definite-lived
intangible assets such as subscriber relationships, and our spectrum assets are primarily combined into a single asset
group for each country in which we operate for purposes of testing impairment.
In the third quarter of 2010, due to our continued losses and significant uncertainties surrounding our ability to
obtain required liquidity to fund our operating and capital needs, management concluded that an adverse change in
circumstances existed requiring us to assess the recoverability of the carrying value of our long-lived assets. Based
on this assessment, we determined that the carrying value of our long-lived assets in the United States was
recoverable, primarily supported by the fair value of our spectrum licenses. Management has determined that a
similar assessment was not necessary in the fourth quarter.
Property, Plant & Equipment
A significant portion of our total assets is PP&E. PP&E represented $4.46 billion of our $11.04 billion in total
assets as of December 31, 2010. We generally calculate depreciation on these assets using the straight-line method
based on estimated economic useful lives. The estimated useful life of equipment is determined based on historical
usage of identical or similar equipment, with consideration given to technological changes and industry trends that
could impact the network architecture and asset utilization. Since changes in technology or in our intended use of
these assets, as well as changes in broad economic or industry factors, may cause the estimated period of use of
these assets to change, we periodically review these factors to assess the remaining life of our asset base. When
these factors indicate that an asset’s useful life is different from the previous assessment, we depreciate the
remaining book values prospectively over the adjusted remaining estimated useful life.
We capitalize certain direct costs, including certain salary and benefit costs and overhead costs, incurred to
prepare the asset for its intended use. We also capitalize interest associated with certain acquisition or construction
costs of network-related assets. Capitalized interest and direct costs are reported as part of the cost of the network-
related assets and as a reduction in the related expense in the statement of operations.
We periodically assess certain assets that have not yet been deployed in our networks, including network
equipment and cell site development costs. This assessment includes the write-off of network equipment for
estimated shrinkage experienced during the deployment process and the write-down of network equipment and cell
site development costs whenever events or changes in circumstances cause us to conclude that such assets are no
longer needed to meet our strategic network plans and will not be deployed. With the substantial completion of our
prior build plans and due to the uncertainty of the extent and timing of future expansion of our networks, we
reviewed all network projects in process. Any network projects in process that no longer fit within management’s
strategic network plans were abandoned and the related costs written down. As we continue to revise our build plans
in response to changes in our strategy, funding availability, technology and industry trends, additional projects could
be identified for abandonment, for which the associated write-downs could be material.
Derivative Valuation
Derivative financial instruments are recorded as either assets or liabilities on our consolidated balance sheet at
their fair value on the date of issuance and are remeasured to fair value on each subsequent balance sheet date until
such instruments are exercised or expire, with any changes in the fair value between reporting periods recorded as
Other income or expense. At December 31, 2010, derivative financial instruments requiring revaluation are
composed primarily of the exchange options, which we refer to as Exchange Options, embedded in our
Exchangeable Notes issued in December 2010 that were required to be accounted for separately from the debt
host contract.
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CLEARWIRE CORPORATION AND SUBSIDIARIES — (Continued)