Clearwire 2010 Annual Report Download - page 85

Spectrum Licenses — Spectrum licenses primarily include owned spectrum licenses with indefinite lives,
owned spectrum licenses with definite lives, and favorable spectrum leases. Indefinite lived spectrum licenses
acquired are stated at cost and are not amortized. While owned spectrum licenses in the United States are issued for
a fixed time, renewals of these 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 owned spectrum licenses and therefore, the licenses are accounted for as intangible assets with
indefinite lives. The impairment test for intangible assets with indefinite useful lives consists of a comparison of the
fair value of an intangible asset with its carrying amount. If the carrying amount of an intangible asset exceeds its
fair value, an impairment loss will be recognized in an amount equal to that excess. The fair value is determined by
estimating the discounted future cash flows that are directly associated with, and that are expected to arise as a direct
result of the use and eventual disposition of, the asset. Spectrum licenses with indefinite useful lives are assessed for
impairment annually, or more frequently, if an event indicates that the asset might be impaired. Internationally, we
recorded an impairment charge of $2.6 million during the year ended December 31, 2010 related to our indefinite-
lived spectrum assets in Ireland in conjunction with our sale of those operations. Other than the Ireland impairment,
we had no other impairment of our indefinite lived intangible assets in any of the periods presented.
Spectrum licenses with definite useful lives and favorable spectrum leases are stated at cost, net of accu-
mulated amortization, and are assessed for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. The carrying value of the definite lived licenses and
spectrum leases are amortized on a straight-line basis over their estimated useful lives or lease term, including
expected renewal periods, as applicable. There were no impairment losses for spectrum licenses with definite useful
lives and favorable spectrum leases in the years ended December 31, 2010, 2009 and 2008.
Other Intangible Assets — Other intangible assets consist of subscriber relationships, trademarks, patents and
other, and are stated at cost net of accumulated amortization. Amortization is calculated using either the straight-
line method or an accelerated method over the assets’ estimated remaining useful lives. Other intangible assets are
assessed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset
may not be recoverable. For the year ended December 31, 2010, we recorded impairment losses of $1.5 million
relating to our definite-lived intangible assets in Ireland in conjunction with our sale of those operations. There were
no impairment losses for our other intangible assets in the years ended December 31, 2009 and 2008.
Derivative Instruments and Hedging Activities — In the normal course of business, we may be exposed to the
effects of interest rate changes. We have limited our exposure by adopting established risk management policies and
procedures, including the use of derivative instruments. It is our policy that derivative transactions are executed only
to manage exposures arising in the normal course of business and not for the purpose of creating speculative
positions or trading. We record all derivatives on the balance sheet at fair value as either assets or liabilities. The
accounting for changes in the fair value of derivatives depends on the intended use of the derivative and whether it
qualifies for hedge accounting.
During December 2010, we issued exchangeable notes that included embedded exchange options which
qualified as embedded derivative instruments that are required to be accounted for separately from the host debt
instruments and recorded as derivative financial instruments at fair value. The embedded exchange options do not
qualify for hedge accounting, and as such, all future changes in the fair value of these derivative instruments will be
recognized currently in earnings until such time as the embedded exchange options are exercised or expire. See
Note 10, Derivative Instruments, for further information.
Debt Issuance Costs — Debt issuance costs are initially capitalized as a deferred cost and amortized to interest
expense under the effective interest method over the expected term of the related debt. Unamortized debt issuance
costs related to extinguishment of debt are expensed at the time the debt is extinguished and recorded in other
income (expenses), net in the consolidated statements of operations. Unamortized debt issuance costs are recorded
in other assets in the consolidated balance sheets.
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CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)