US Cellular 2013 Annual Report Download - page 47

United States Cellular Corporation
Notes to Consolidated Financial Statements (Continued)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING
PRONOUNCEMENTS (Continued)
value hierarchy is not representative of its expected performance or its overall risk profile and, therefore,
Level 3 assets are not necessarily higher risk than Level 2 assets or Level 1 assets.
Goodwill
U.S. Cellular has Goodwill as a result of its acquisitions of wireless businesses. Such Goodwill represents
the excess of the total purchase price over the fair value of net assets acquired in these transactions.
Licenses
Licenses consist of direct and incremental costs incurred in acquiring Federal Communications
Commission (‘‘FCC’’) licenses to provide wireless service.
U.S. Cellular has determined that wireless licenses are indefinite-lived intangible assets and, therefore,
not subject to amortization based on the following factors:
• Radio spectrum is not a depleting asset.
• The ability to use radio spectrum is not limited to any one technology.
• U.S. Cellular and its consolidated subsidiaries are licensed to use radio spectrum through the FCC
licensing process, which enables licensees to utilize specified portions of the spectrum for the
provision of wireless service.
• U.S. Cellular and its consolidated subsidiaries are required to renew their FCC licenses every ten years
or, in some cases, every fifteen years. To date, all of U.S. Cellular’s license renewal applications have
been granted by the FCC. Generally, license renewal applications filed by licensees otherwise in
compliance with FCC regulations are routinely granted. If, however, a license renewal application is
challenged either by a competing applicant for the license or by a petition to deny the renewal
application, the license will be renewed if the licensee can demonstrate its entitlement to a ‘‘renewal
expectancy.’’ Licensees are entitled to such an expectancy if they can demonstrate to the FCC that
they have provided ‘‘substantial service’’ during their license term and have ‘‘substantially complied’’
with FCC rules and policies. U.S. Cellular believes that it is probable that its future license renewal
applications will be granted.
Goodwill and Licenses Impairment Assessment
Goodwill and Licenses must be assessed for impairment annually or more frequently if events or
changes in circumstances indicate that such assets might be impaired. U.S. Cellular performs its annual
impairment assessment of Goodwill and Licenses as of November 1 of each year.
U.S. Cellular may first assess qualitative factors, such as company, industry and economic trends to
determine whether it is necessary to perform the two-step Goodwill impairment test. If determined to be
necessary, the first step compares the fair value of the reporting unit to its carrying value. If the carrying
amount exceeds the fair value, the second step of the test is performed to measure the amount of
impairment loss, if any. The second step compares the implied fair value of reporting unit Goodwill with
the carrying amount of that Goodwill. To calculate the implied fair value of Goodwill in this second step,
an enterprise allocates the fair value of the reporting unit to all of the assets and liabilities of that
reporting unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in
a business combination and the fair value was the price paid to acquire the reporting unit. The excess of
the fair value of the reporting unit over the amount assigned to the assets and liabilities of the reporting
unit is the implied fair value of Goodwill. If the carrying amount of Goodwill exceeds the implied fair value
of Goodwill, an impairment loss is recognized for that difference.
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