Clearwire 2007 Annual Report Download - page 76

Internally Developed Software — Clearwire capitalizes costs related to computer software developed or
obtained for internal use in accordance with Statement of Position (“SOP”) No. 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. Software obtained for internal use has generally been
enterprise-level business and finance software customized to meet specific operational needs. Costs incurred in the
application development phase are capitalized and amortized over the useful life of the software, which is generally
three years. Costs recognized in the preliminary project phase and the post-implementation phase are expensed as
incurred.
Intangible Assets — Intangible assets consist primarily of Federal Communications Commission (“FCC”)
spectrum licenses and other intangible assets related to Clearwire’s acquisition of NextNet in March 2004, which
was subsequently disposed in August 2006, and Banda Ancha S.A. (“BASA”) in December 2005 and February
2006. As further described in Note 7, Spectrum Licenses, Goodwill and Other Intangible Assets, the Company
accounts for its spectrum licenses and other intangible assets in accordance with the provisions of SFAS No. 142,
Goodwill and Other Intangible Assets (“SFAS No. 142). In accordance with SFAS No. 142, intangible assets with
indefinite useful lives are not amortized but must be assessed for impairment annually or more frequently if an event
indicates that the asset might be impaired. The Company performed its annual impairment test of indefinite lived
intangible assets on October 1, 2007 and concluded that there was no impairment of these intangible assets.
Goodwill — Goodwill represents the excess of the purchase price over the estimated fair value of net assets
acquired from Clearwire’s acquisitions. In accordance with SFAS No. 142, the Company completes a two-step
process to determine the amount of goodwill impairment. The first step involves comparison of the fair value of the
reporting unit to its carrying value to determine if any impairment exists. If the fair value of the reporting unit is less
than the carrying value, goodwill is considered to be impaired and the second step is performed. The second step
involves comparison of the implied fair value of goodwill to its carrying value. The implied fair value of goodwill is
determined by allocating fair value to the various assets and liabilities within the reporting unit in the same manner
goodwill is recognized in a business combination. In calculating an impairment charge, the fair value of the
impaired reporting units are estimated using a discounted cash flow valuation methodology or by reference to recent
comparable transactions. In making this assessment, the Company relies on a number of factors, including operating
results, business plans, economic projections, and anticipated future cash flows. There are inherent uncertainties
related to these factors and judgment in applying these factors to the goodwill impairment test. The Company
performed its annual impairment tests of goodwill as of October 1, 2007, and concluded that there was no
impairment of goodwill.
Long-Lived Assets — Long-lived assets to be held and used, including property, plant and equipment and
intangible assets with definite useful lives, are assessed for impairment whenever events or changes in circum-
stances indicate that the carrying amount of an asset may not be recoverable. If the total of the expected
undiscounted future cash flows is less than the carrying amount of the asset, a loss, if any, is recognized for
the difference between the fair value and carrying value of the assets. Impairment analyses, when performed, are
based on the Company’s business and technology strategy, management’s views of growth rates for its business,
anticipated future economic and regulatory conditions and expected technological availability. For purposes of
recognition and measurement, the Company groups its long-lived assets at the lowest level for which there are
identifiable cash flows which are largely independent of other assets and liabilities.
Deferred Financing Costs — Deferred financing costs consists primarily of investment banking fees, legal,
accounting and printing costs associated with the issuance of the Company’s long-term debt. Deferred financing
fees are amortized over the life of the corresponding debt facility. In relation to the issuances of the long-term debt
discussed in Note 10, Long-Term Debt, the Company incurred $30.2 million of deferred financing costs in 2007 for
its $1.25 billion senior term loan facility entered into during 2007 and an additional $39.3 million related to the
repayment of its $125.0 million term loan and the retirement of its $620.7 million senior secured notes due 2010,
compared to $21.8 million in 2006. For the years ended December 31, 2007 and 2006, $6.7 million and $3.9 million,
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CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)