Cricket Wireless 2011 Annual Report Download - page 118

Download and view the complete annual report

Please find page 118 of the 2011 Cricket Wireless annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 164

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164

LEAP WIRELESS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
license is less than its carrying value and is measured as the amount by which the license’s carrying value
exceeds its fair value. Any required impairment loss would be recorded as a reduction in the carrying value of the
relevant wireless license and charged to results of operations. As a result of the Company’s annual impairment
test of wireless licenses, the Company recorded impairment charges of $0.4 million, $0.8 million and $0.6
million during the years ended December 31, 2011, 2010 and 2009. respectively, to reduce the carrying value of
certain non-operating wireless licenses to their estimated fair values. As more fully described below, the fair
value of the Company’s and Savary Island’s wireless licenses was determined using Level 3 inputs in accordance
with the authoritative guidance for fair value measurements.
The valuation method the Company uses to determine the fair value of its and Savary Island’s wireless
licenses is the market approach. Under this method, the Company determines fair value by comparing their
respective wireless licenses to sales prices of other wireless licenses of similar size and type that have been
recently sold through government auctions and private transactions. As part of this market-level analysis, the fair
value of each wireless license is also evaluated and adjusted for developments or changes in legal, regulatory and
technical matters, and for demographic and economic factors, such as population size, unemployment rates,
composition, growth rate and density, household and disposable income, and composition and concentration of
the market’s workforce in industry sectors identified as wireless-centric (e.g., real estate, transportation,
professional services, agribusiness, finance and insurance).
In connection with the Company’s 2011 annual impairment test, the aggregate fair value and carrying value
of the Company and Savary Island’s individual operating wireless licenses were $2,453.0 million and $1,778.6
million, respectively, as of September 30, 2011. No impairment charges were recorded during the year ended
December 31, 2011 with respect to the Company and Savary Island’s operating wireless licenses as the aggregate
fair value of these licenses exceeded their aggregate carrying value. If the fair value of the Company and Savary
Island’s operating wireless licenses had declined by 10%, the Company would not have recognized any
impairment loss.
In connection with the Company’s 2011 annual impairment test, the aggregate fair value and carrying value
of the Company’s individual non-operating wireless licenses were $246.8 million and $162.2 million,
respectively, as of September 30, 2011. The Company recorded an impairment charge of $0.4 million during the
year ended December 31, 2011 to reduce the carrying values of certain non-operating wireless licenses to their
estimated fair values. If the fair value of the Company’s non-operating wireless licenses had each declined by
10%, the Company would have recognized an impairment loss of approximately $2.2 million.
The Company evaluated whether any triggering events or changes in circumstances occurred subsequent to
the 2011 annual impairment test of its wireless licenses which indicate that an impairment condition may exist.
This evaluation included consideration of whether there had been any significant adverse change in legal factors
or in the Company’s business climate, adverse action or assessment by a regulator, unanticipated competition,
loss of key personnel or likely sale or disposal of all or a significant portion of an asset group. Based upon this
evaluation, the Company concluded that no triggering events or changes in circumstances had occurred.
Goodwill
The Company records the excess of the purchase price over the fair value of net assets acquired in a
business combination as goodwill. As of December 31, 2011 and 2010, goodwill of $31.9 million and $31.1
million, respectively, primarily represented the excess of the purchase price over the fair values of the assets
acquired (net of liabilities assumed, including the related deferred tax effects) by STX Wireless in connection
with the formation of the joint venture. As of December 31, 2009, goodwill primarily represented the excess of
the Company’s reorganization value over the fair value of identified tangible and intangible assets recorded in
connection with fresh-start reporting as of July 31, 2004.
108