iHeartMedia 2004 Annual Report Download - page 72

Under the direct method, the Company continues to aggregate its indefinite-lived intangible assets at the market level for purposes of
impairment testing as prescribed by EITF 02-07. The Company’s key assumptions using the direct method are market revenue growth rates,
market share, profit margin, duration and profile of the build-up period, estimated start-up capital costs and losses incurred during the build-up
period, the risk-adjusted discount rate and terminal values. This data is populated using industry normalized information representing an
average station within a market.
The Company’s adoption of the direct method resulted in an aggregate fair value of its indefinite-lived intangible assets that were less than the
carrying value determined under its prior method. As a result of the adoption of D-108, the Company recorded a non-cash charge of $4.9
billion, net of deferred taxes of $3.0 billion as a cumulative effect of a change in accounting principle during the fourth quarter of 2004. The
non-cash charge of $4.9 billion, net of tax is comprised of a non-cash charge of $4.7 billion and $.2 billion within our broadcasting FCC
licenses and our outdoor permits, respectively.
On January 1, 2002, the Company adopted Statement 142, which addresses financial accounting and reporting for acquired goodwill and other
intangible assets and supersedes APB Opinion No. 17, Intangible Assets. Statement 142 established new accounting for goodwill and other
intangible assets recorded in business combinations. As a result of the adoption of Statement 142, the Company recognized impairment on its
FCC licenses of approximately $6.0 billion, net of deferred tax of $3.7 billion, which was recorded as a component of the cumulative effect of
a change in accounting principle during the first quarter of 2002. The Company performed subsequent impairment tests at October 1, 2004 and
2003, which resulted in no further impairment charge.
Goodwill
The Company tests goodwill for impairment using a two-step process. The first step, used to screen for potential impairment, compares the fair
value of the reporting unit with its carrying amount, including goodwill. The second step, used to measure the amount of the impairment loss,
compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. The following table presents the
changes in the carrying amount of goodwill in each of the Company’s reportable segments for the years ended December 31, 2004 and 2003:
During 2004, the Company made adjustments to goodwill for $194.0 million primarily related to tax contingencies that were recorded at the
time of acquisition that were resolved favorably in 2004.
Upon adopting Statement 142, the Company completed the two-step impairment test during the first quarter of 2002. As a result of this test, the
Company recognized impairment of approximately $10.8 billion, net of deferred taxes of $659.1 million related to tax deductible goodwill, as a
component of the cumulative effect of a change in accounting principle during the first quarter of 2002.
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(In thousands) Radio Outdoor Entertainment Other Total
Balance as of December 31, 2002 $6,416,146 $640,966 $155,377 $28,742 $7,241,231
Acquisitions 3,582 15,982 2,773

22,337
Dispositions

(894)


(894)
Foreign currency

48,392 1,422

49,814
Adjustments (537)6,369 (11,982)

(6,150)
Balance as of December 31, 2003 6,419,191 710,815 147,590 28,742 7,306,338
Acquisitions 8,201 56,785 16,214 458 81,658
Foreign currency

29,401 (2,943)

26,458
Adjustments (58,210)(9,307)(126,432)(61)(194,010)
Balance as of December 31, 2004 $6,369,182 $787,694 $ 34,429 $29,139 $7,220,444