Clearwire 2010 Annual Report Download - page 83

any anticipated recovery in market value. If it is judged that a decline in fair value is other-than-temporary, a
realized loss equal to the decline is reflected in the consolidated statement of operations, and a new cost basis in the
investment is established.
We account for certain of our investments using the equity method based on our ownership interest and our
ability to exercise significant influence. Accordingly, we record our investment initially at cost and we adjust the
carrying amount of the investment to recognize our share of the earnings or losses of the investee each reporting
period. We cease to recognize investee losses when our investment basis is zero.
Fair Value Measurements — Fair value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. In determining fair value,
we use various methods including market, cost and income approaches. Based on these approaches, we utilize
certain assumptions that market participants would use in pricing the asset or liability, including assumptions about
risk. The three-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs used in the
methodologies of measuring fair value for assets and liabilities, is as follows:
Level 1: Quoted market prices in active markets for identical assets or liabilities
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data
Level 3: Unobservable inputs that are not corroborated by market data
Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is
significant to the fair value measurements. Our assessment of the significance of a particular input to the fair value
measurement requires judgment, and may affect the valuation of the assets and liabilities being measured and their
placement within the fair value hierarchy.
We maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair
value measurements. If listed prices or quotes are not available, fair values of other debt securities and derivatives
are based upon internally developed or other available models that primarily use, as inputs, market-based or
independently sourced market parameters, including but not limited to interest rate yield curves, volatilities, equity
or debt prices, and credit curves. We utilize certain assumptions that market participants would use in pricing the
financial instrument, including assumptions about risk, such as credit, inherent and default risk. The degree of
management judgment involved in determining the fair value of a financial instrument is dependent upon the
availability of quoted market prices or observable market parameters. For financial instruments that trade actively
and have quoted market prices or observable market parameters, there is minimal judgment involved in measuring
fair value. When observable market prices and parameters are not fully available, management judgment is
necessary to estimate fair value. In addition, changes in market conditions may reduce the availability and reliability
of quoted prices or observable data. In these instances, we use certain unobservable inputs that cannot be validated
by reference to a readily observable market or exchange data and rely, to a certain extent, on our own assumptions
about the assumptions that a market participant would use in pricing the security. These internally derived values are
compared with non-binding values received from brokers or other independent sources, as available. See Note 11,
Fair Value, for further information.
Accounts Receivable — Accounts receivables are stated at amounts due from subscribers and our wholesale
partners net of an allowance for doubtful accounts.
Inventory — Inventory primarily consists of customer premise equipment, which we refer to as CPE, and other
accessories sold to subscribers and is stated at the lower of cost or net realizable value. Cost is determined under the
average cost method. We record inventory write-downs for obsolete and slow-moving items based on inventory
turnover trends and historical experience.
Property, Plant and Equipment — Property, plant and equipment, which we refer to as PP&E, is stated at cost,
net of accumulated depreciation. Depreciation is calculated on a straight-line basis over the estimated useful lives of
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CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)