Metro PCS 2010 Annual Report Download - page 114

MetroPCS Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2010, 2009 and 2008
F-8
Prepaid Expenses
Prepaid expenses consisted of the following (in thousands):
2010 2009
Prepaid rent ................................................................................................................................. $ 35,703 $ 32,236
Prepaid maintenance and support contracts ................................................................................. 8,047 4,540
Prepaid insurance ........................................................................................................................ 2,098 2,312
Prepaid advertising ...................................................................................................................... 1,590 2,140
Othe
r
............................................................................................................................................ 3,039 7,125
Prepaid expenses ......................................................................................................................... $ 50,477 $ 48,353
Property and Equipment
Property and equipment, net, consisted of the following (in thousands):
2010 2009
Construction-in-
p
rogress .................................................................................................... $ 425,906 $ 283,365
Network infrastructure (1)................................................................................................... 4,363,009 3,756,300
Office equipment ................................................................................................................ 205,895 158,732
Leasehold improvements .................................................................................................... 57,853 55,631
Furniture and fixtures ......................................................................................................... 15,992 14,033
Vehicles .............................................................................................................................. 401 401
5,069,056 4,268,462
Accumulated depreciation and amortization (1) ................................................................. (1,409,611) (1,016,249)
Property and equipment, net ............................................................................................... $ 3,659,445 $ 3,252,213
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(1) As of December 31, 2010 and 2009, approximately $259.0 million and $183.4 million, respectively, of network infrastructure assets were
held by the Company under capital lease arrangements. Accumulated amortization relating to these assets totaled $23.7 million and $9.8
million as of December 31, 2010 and 2009, respectively.
Property and equipment are stated at cost. Additions and improvements are capitalized, while expenditures that
do not enhance or extend the asset’s useful life are charged to operating expenses as incurred. When the Company
sells, disposes of or retires property and equipment, the related gains or losses are included in operating results.
Depreciation is applied using the straight-line method over the estimated useful lives of the assets once the assets are
placed in service, which are seven to ten years for network infrastructure assets, three to ten years for capitalized
interest, up to fifteen years for capital lease assets, three to eight years for office equipment, which includes software
and computer equipment, three to seven years for furniture and fixtures and five years for vehicles. Leasehold
improvements are amortized over the shorter of the remaining term of the lease and any renewal periods reasonably
assured or the estimated useful life of the improvement. Maintenance and repair costs are charged to expense as
incurred. The Company follows the provisions of ASC 835 (Topic 835, “Interest”), with respect to its FCC licenses
and the related construction of its network infrastructure assets. Capitalization commences with pre-construction
period administrative and technical activities, which includes obtaining leases, zoning approvals and building
permits, and ceases at the point in which the asset is ready for its intended use, which generally coincides with the
market launch date. For the years ended December 31, 2010, 2009 and 2008, the Company capitalized interest in the
amount of $24.5 million, $37.5 million and $64.2 million, respectively.
Software Costs
In accordance with ASC 350 (Topic 350, “Intangibles – Goodwill and Other”), certain costs related to the
purchase of internal use software are capitalized and amortized over the estimated useful life of the software. For the
years ended December 31, 2010, 2009 and 2008, approximately $38.3 million, $69.2 million and $14.6 million,
respectively, of purchased software costs under ASC 350 were placed in service. The Company amortizes software
costs over an estimated useful life of three to eight years and for the years ended December 31, 2010, 2009 and
2008, the Company recognized amortization expense of approximately $26.6 million, $18.0 million and
$10.7 million, respectively. Capitalized software costs are classified as office equipment.