Metro PCS 2010 Annual Report Download - page 117

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MetroPCS Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2010, 2009 and 2008
F-11
indefinite-lived intangible assets using a discounted cash flow model. Cash flow projections and assumptions,
although subject to a degree of uncertainty, are based on a combination of the Company’s historical performance
and trends, its business plans and management’s estimate of future performance, giving consideration to existing and
anticipated competitive economic conditions. Other assumptions include the Company’s weighted average cost of
capital and long-term rate of growth for its business. The Company believes that its estimates are consistent with
assumptions that market participants would use to estimate fair value.
For the purpose of performing the annual impairment test as of September 30, 2010, the indefinite-lived
intangible assets were aggregated and combined into a single unit of accounting. The Company believes that
utilizing its indefinite-lived intangible assets as a group represents the highest and best use of the assets, and the
value of the indefinite-lived intangible assets would not be significantly impacted by a sale of one or a portion of the
indefinite-lived intangible assets, among other factors. No impairment was recognized as the fair value of the
indefinite-lived intangible assets exceeded their carrying value as of September 30, 2010. Although the Company
does not expect its estimates or assumptions to change significantly in the future, the use of different estimates or
assumptions within the discounted cash flow model when determining the fair value of the indefinite-lived
intangible assets or using a methodology other than a discounted cash flow model could result in different values for
the indefinite-lived intangible assets and may affect any related impairment charge. The most significant
assumptions within the Company’s discounted cash flow model are the discount rate, the projected growth rate and
management’s future business plans. A one percent decline in annual revenue growth rates, a one percent decline in
annual net cash flows or a one percent increase in discount rate would not result in impairment as of September 30,
2010.
Furthermore, there have been no subsequent indicators of impairment including those indicated in ASC 360
(Topic 360, “Property, Plant, and Equipment”). Accordingly, no subsequent interim impairment tests were
performed.
Advertising and Promotion Costs
Advertising and promotion costs are expensed as incurred and are included in selling, general and administrative
expenses in the accompanying consolidated statements of income and comprehensive income. Advertising costs
totaled $187.3 million, $150.8 million and $99.0 million during the years ended December 31, 2010, 2009 and 2008,
respectively.
Income Taxes
The Company records income taxes pursuant to ASC 740 (Topic 740, “Income Taxes”). ASC 740 uses an asset
and liability approach to account for income taxes, wherein deferred taxes are provided for book and tax basis
differences for assets and liabilities. In the event differences between the financial reporting basis and the tax basis
of the Company’s assets and liabilities result in deferred tax assets, a valuation allowance is provided for a portion
or all of the deferred tax assets when there is sufficient uncertainty regarding the Company’s ability to recognize the
benefits of the assets in future years.
The Company accounts for uncertainty in income taxes recognized in the financial statements in accordance with
ASC 740, which provides guidance on the financial statement recognition and measurement of a tax position taken
or expected to be taken in a tax return. ASC 740 also provides guidance on de-recognition, classification, interest
and penalties, accounting in interim periods, disclosures, and transition issues.
Other Comprehensive Income (Loss)
Unrealized gains on available-for-sale securities and cash flow hedging derivatives are reported in accumulated
other comprehensive loss as a separate component of stockholders’ equity until realized. Realized gains and losses
on available-for-sale securities are included in interest income. Gains or losses on cash flow hedging derivatives
reported in accumulated other comprehensive loss are reclassified to earnings in the period in which earnings are
affected by the underlying hedged transaction. Accumulated other comprehensive loss consisted of a $3.7 million
comprehensive gain related to available-for-sale securities and a $5.1 million net comprehensive loss related to cash