Cricket Wireless 2011 Annual Report Download - page 106

LEAP WIRELESS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes the depreciable lives for property and equipment (in years):
Depreciable
Life
Network equipment:
Switches .............................................................. 10
Switch power equipment .................................................. 15
Cell site equipment and site improvements ................................... 7
Towers ................................................................ 15
Antennae .............................................................. 5
Computer hardware and software ............................................. 3-5
Furniture, fixtures retail and office equipment ................................... 3-7
The Company’s network construction expenditures are recorded as construction-in-progress until the
network or other asset is placed in service, at which time the asset is transferred to the appropriate property or
equipment category and depreciation commences. The Company capitalizes salaries and related costs of
engineering and technical operations employees as components of construction-in-progress during the
construction period to the extent time and expense are attributed to the construction effort. The Company also
capitalizes certain telecommunications and other related costs as construction-in-progress during the construction
period to the extent they are incremental and directly related to the network under construction. In addition,
interest is capitalized on the carrying values of both wireless licenses and equipment during the construction
period and is depreciated over an estimated useful life of ten years. During the years ended December 31, 2011
and 2010, the Company did not capitalize any interest to property and equipment.
In accordance with the authoritative guidance for accounting for costs of computer software developed or
obtained for internal use, certain costs related to the development of internal use software are capitalized and
amortized over the estimated useful life of the software. During the years ended December 31, 2011 and 2010,
the Company capitalized internal use software costs of $88.6 million and $114.5 million, respectively, to
property and equipment, and amortized internal use software costs of $56.5 million and $32.8 million,
respectively.
Impairment of Long-Lived Assets
The Company assesses potential impairments to its long-lived assets, including property and equipment and
certain intangible assets, when there is evidence that events or changes in circumstances indicate that their
respective carrying values may not be recoverable. An impairment loss may be required to be recognized when
the undiscounted cash flows expected to be generated by a long-lived asset (or group of such assets) is less than
its carrying value. Any required impairment loss would be measured as the amount by which the asset’s carrying
value exceeds its fair value and would be recorded as a reduction in the carrying value of the related asset and
charged to results of operations. There were no events or circumstances that occurred during the year ended
December 31, 2011 that indicated that the carrying value of any long-lived assets may not be recoverable.
In August 2010, the Company entered into a wholesale agreement with an affiliate of Sprint Nextel which
the Company uses to offer Cricket services in nationwide retailers outside of its current network footprint. This
agreement allowed it to strengthen and expand its distribution and provided it greater flexibility with respect to
its network expansion plans. As a result, after entering into this wholesale agreement, the Company determined
to spend an increased portion of its planned capital expenditures on the deployment of next-generation LTE
technology and to defer its previously planned network expansion activities. As a result of these developments,
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