Metro PCS 2010 Annual Report Download - page 118

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MetroPCS Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2010, 2009 and 2008
F-12
flow hedging derivatives as of December 31, 2010.
Stock-Based Compensation
The Company accounts for share-based awards exchanged for employee services in accordance with ASC 718
(Topic 718, “Compensation – Stock Compensation”). Under ASC 718, share-based compensation cost is measured
at the grant date, based on the estimated fair value of the award, and is recognized as expense over the employee’s
requisite service period.
Asset Retirement Obligations
The Company accounts for asset retirement obligations as determined by ASC 410 (Topic 410, “Asset Retirement
and Environmental Obligations”) which addresses financial accounting and reporting for legal obligations
associated with the retirement of tangible long-lived assets and the related asset retirement costs. ASC 410 requires
that companies recognize the fair value of a liability for an asset retirement obligation in the period in which it is
incurred. When the liability is initially recorded, the entity capitalizes a cost by increasing the carrying amount of
the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized
cost is depreciated over the estimated useful life of the related asset. Upon settlement of the liability, an entity either
settles the obligation for its recorded amount or incurs a gain or loss upon settlement.
The Company is subject to asset retirement obligations associated with its cell site operating leases, which are
subject to the provisions of ASC 410. Cell site lease agreements may contain clauses requiring restoration of the
leased site at the end of the lease term to its original condition, creating an asset retirement obligation. This liability
is classified under other long-term liabilities. Landlords may choose not to exercise these rights as cell sites are
considered useful improvements. In addition to cell site operating leases, the Company has leases related to switch
site locations subject to the provisions of ASC 410.
The following table summarizes the Company’s asset retirement obligation transactions (in thousands):
2010 2009
Beginning asset retirement obligations .............................................................................................. $ 63,005 $ 46,518
Liabilities incurre
d
............................................................................................................................ 6,484 12,149
Liabilities settle
d
............................................................................................................................... (512) (773)
Revisions of estimated future cash flows........................................................................................... (13,004) 0
Accretion expense ............................................................................................................................. 3,063 5,111
Ending asset retirement obligations ................................................................................................... $ 59,036 $ 63,005
During the year ended December 31, 2010, the Company revised cost estimates used to determine the fair value of
its asset retirement obligations resulting in a $13.0 million reduction in the liability and related asset.
Earnings per Share
Basic earnings per share (“EPS”) are based upon the weighted average number of common shares outstanding for
the period. Diluted EPS is computed in the same manner as EPS after assuming issuance of common stock for all
potentially dilutive equivalent shares, whether exercisable or not.
In accordance with ASC 260 (Topic 260, “Earnings Per Share”), unvested share-based payment awards that
contain rights to receive non-forfeitable dividends or dividend equivalents, whether paid or unpaid, are considered a
“participating security” for purposes of computing earnings or loss per common share and the two-class method of
computing earnings per share is required for all periods presented. During the years ended December 31, 2010 and
2009, the Company issued restricted stock awards. Unvested shares of restricted stock are participating securities
such that they have rights to receive non-forfeitable dividends. In accordance with ASC 260, the unvested restricted
stock was considered a “participating security” for purposes of computing earnings per common share and was
therefore included in the computation of basic and diluted earnings per common share. When determining basic
earnings per common share under ASC 260, undistributed earnings for a period are allocated to a participating