iHeartMedia 2014 Annual Report Download - page 66

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64
Foreign Currency Exchange Rate Risk
We have operations in countries throughout the world. Foreign operations are measured in their local currencies. As a result,
our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in
the foreign markets in which we have operations. We believe we mitigate a small portion of our exposure to foreign currency
fluctuations with a natural hedge through borrowings in currencies other than the U.S. dollar. Our foreign operations reported net
income of $80.2 million for the year ended December 31, 2014. We estimate a 10% increase in the value of the U.S. dollar relative to
foreign currencies would have increased our net loss for the year ended December 31, 2014 by $8.0 million. A 10% decrease in the
value of the U.S. dollar relative to foreign currencies during the year ended December 31, 2014 would have decreased our net loss by
a corresponding amount.
This analysis does not consider the implications that such currency fluctuations could have on the overall economic activity
that could exist in such an environment in the U.S. or the foreign countries or on the results of operations of these foreign entities.
Inflation
Inflation is a factor in the economies in which we do business and we continue to seek ways to mitigate its effect. Inflation
has affected our performance in terms of higher costs for wages, salaries and equipment. Although the exact impact of inflation is
indeterminable, we believe we have offset these higher costs by increasing the effective advertising rates of most of our broadcasting
stations and outdoor display faces in our iHM, Americas outdoor, and International outdoor operations.
NEW ACCOUNTING PRONOUNCEMENTS
During the first quarter of 2014, the Company adopted the Financial Accounting Standards Board’s (“FASB”) ASU No.
2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed
at the Reporting Date. This update provides guidance for the recognition, measurement and disclosure of obligations resulting from
joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the
reporting date. The amendments are effective for fiscal years (and interim periods within) beginning after December 15, 2013 and are
to be applied retrospectively to all prior periods presented for such obligations that exist at the beginning of an entity’s fiscal year of
adoption. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.
During the first quarter of 2014, the Company adopted the FASB’s ASU No. 2013-05, Parent’s Accounting for the
Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity of an
Investment in a Foreign Entity. The amendments are effective prospectively for the fiscal years (and interim periods within) beginning
after December 15, 2013 and provide clarification guidance for the release of the cumulative translation adjustment under current U.S.
GAAP. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements
During the first quarter of 2014, the Company adopted the FASB’s ASU No. 2013-11, Presentation of an Unrecognized Tax
Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This update requires
unrecognized tax benefits to be offset against a deferred tax asset for a net operating loss carryforward, similar tax loss or tax credit
carryforward in certain situations. The amendments are effective prospectively for the fiscal years (and interim periods within)
beginning after December 15, 2013. The adoption of this guidance did not have a material effect on the Company’s consolidated
financial statements.
During the second quarter of 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. This new
standard provides guidance for the recognition, measurement and disclosure of revenue resulting from contracts with customers and
will supersede virtually all of the current revenue recognition guidance under U.S. GAAP. The standard is effective for the first
interim period within annual reporting periods beginning after December 15, 2016. The Company is currently evaluating the impact
of the provisions of this new standard on its financial position and results of operations.
During the third quarter of 2014, the FASB issued ASU No. 2014-12, Accounting for Share-Based Payments When the Terms
of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This new standard clarifies
that a performance target in a share-based compensation award that could be achieved after an employee completes the requisite
service period should be treated as a performance condition that affects the vesting of the award. The standard is effective for annual
periods and interim periods within those annual periods, beginning after December 15, 2015. The Company is currently evaluating
the impact of the provisions of this new standard on its financial position and results of operations.