Cricket Wireless 2012 Annual Report Download - page 106

LEAP WIRELESS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
flexibility with respect to the Company’s 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, costs for certain network, design, site acquisition and capitalized interest
relating to the expansion of the Company’s network that had been previously accumulated in construction-in-
progress were determined to be impaired and the Company recorded an impairment charge of $46.5 million
during the third quarter of 2010.
Impairment of Indefinite-Lived Intangible Assets
The Company assesses potential impairments to its indefinite-lived intangible assets, including wireless
licenses and goodwill, on an annual basis or when there is evidence that events or changes in circumstances
indicate an impairment condition may exist. In addition on a quarterly basis, the Company evaluates the
triggering event criteria outlined in the authoritative guidance for intangible assets to determine whether events
or changes in circumstances indicate that an impairment condition may exist. The Company’s annual impairment
test is conducted each year during the third quarter as further discussed in Note 5.
Wireless Licenses
The Company holds Personal Communications Services (“PCS”), Advanced Wireless Services (“AWS”)
and 700 MHz wireless licenses granted by the FCC that are specific to a particular geographic area on spectrum
that has been allocated by the FCC for such services. Wireless licenses are recorded at cost when acquired and
are not amortized. Although FCC licenses are issued with a stated term (ten years in the case of PCS and 700
MHz licenses and fifteen years in the case of AWS licenses), wireless licenses are considered to be indefinite-
lived intangible assets because the Company expects to provide wireless service using the relevant licenses for
the foreseeable future. PCS, AWS and 700 MHz licenses are routinely renewed for either no or a nominal fee and
management has determined that no legal, regulatory, contractual, competitive, economic or other factors
currently exist that limit the useful lives of the Company’s wireless licenses. On a quarterly basis, the Company
evaluates the remaining useful lives of its indefinite-lived wireless licenses to determine whether events and
circumstances, such as legal, regulatory, contractual, competitive, economic or other factors, continue to support
an indefinite useful life. If a wireless license is subsequently determined to have a finite useful life, the Company
would first test the wireless license for impairment and the wireless license would then be amortized
prospectively over its estimated remaining useful life. In addition, on a quarterly basis, the Company evaluates
the triggering event criteria outlined in the authoritative guidance for intangible assets to determine whether
events or changes in circumstances indicate that an impairment condition may exist. The Company also tests its
wireless licenses for impairment on an annual basis in accordance with the authoritative guidance for intangible
assets. The Company’s annual impairment test is conducted each year during the third quarter. Refer to “Note 5.
Wireless Licenses and Goodwill” for further discussion regarding the Company’s impairment evaluation of
wireless licenses.
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, 2012 and 2011, goodwill of $31.9 million primarily
represented the excess of the purchase price over the fair value 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.
Refer to “Note 6. Significant Acquisitions and Other Transactions” for further discussion of the Company’s
purchase price allocation and determination of goodwill. Goodwill is tested for impairment annually as well as
when an event or change in circumstance indicates an impairment may have occurred. The Company’s annual
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