Clearwire 2009 Annual Report Download - page 60

We assess t
h
e
i
mpa
i
rment o
fi
ntan
gibl
e assets w
i
t
hi
n
d
e
fi
n
i
te use
f
u
lli
ves, cons
i
st
i
n
g
pr
i
mar
ily
o
f
spectru
m
licenses, at least annuall
y
, or whenever an event or chan
g
e in circumstances indicates that the carr
y
in
g
value of such
asset or group o
f
assets may not
b
e recovera
bl
e. Our annua
li
mpa
i
rment test
i
ng
i
s per
f
orme
d
as o
f
eac
h
O
cto
b
er 1st an
d
we per
f
orm a rev
i
ew o
f
t
h
eex
i
stence o
f
events or c
h
anges
i
nc
i
rcumstances re
l
ate
d
to t
he
r
ecoverabilit
y
of our intan
g
ible assets with indefinite useful lives on a quarterl
y
basis. Factors we conside
r
i
mportant, any o
f
w
hi
c
h
cou
ld
tr
i
gger an
i
mpa
i
rment rev
i
ew,
i
nc
l
u
d
e:
•si
g
nificant underperformance relative to expected historical or pro
j
ected future operatin
g
results;
•s
ig
n
ifi
cant c
h
an
g
es
i
n our use o
f
t
h
e assets or t
h
e strate
gy f
or our overa
ll b
us
i
ness; an
d
• significant negative industry or economic trends.
O
ur spectrum licenses in the United States are combined into a sin
g
le unit of account for purposes of testin
g
i
mpairment because management believes that utilizing these licenses as a group represents the highest and best us
e
o
f
t
h
e assets an
di
s cons
i
stent w
i
t
h
t
h
e management’s strategy o
f
ut
ili
z
i
ng our spectrum
li
censes on an
i
ntegrate
d
b
asis as
p
art of our nationwide network.
Th
e
i
mpa
i
rment test
f
or
i
ntang
ibl
e assets w
i
t
hi
n
d
e
fi
n
i
te use
f
u
lli
ves cons
i
sts o
f
a compar
i
son o
f
t
h
e
f
a
i
rva
l
u
e
of the intan
g
ible asset with its carr
y
in
g
amount. We performed our test of the fair value of spectrum usin
g
a
di
scounte
d
cas
hfl
ow mo
d
e
l
(t
h
e Green
fi
e
ld
Approac
h
), w
hi
c
h
approx
i
mates va
l
ue
b
y assum
i
ng a company
i
s
s
tarte
d
own
i
ng on
l
yt
h
e spectrum
li
censes, an
d
t
h
en ma
k
es
i
nvestments requ
i
re
d
to
b
u
ild
an operat
i
on compara
bl
et
o
t
he one in which the licenses are presentl
y
utilized. We utilized a 10
y
ear discrete period to isolate cash flows
attributable to the licenses including modeling the hypothetical build out. Assumptions key in estimating fair value
un
d
er t
hi
s met
h
o
di
nc
l
u
d
e,
b
ut are not
li
m
i
te
d
to, revenue an
d
su
b
scr
ib
er growt
h
rates, operat
i
ng expen
di
tures,
c
ap
i
ta
l
expen
di
tures, ava
il
a
bili
t
y
o
f
a
d
equate
f
un
di
n
g
, mar
k
et s
h
are ac
hi
eve
d
, term
i
na
l
va
l
ue
g
rowt
h
rate, tax rates
and discount rate. The assum
p
tions which underlie the develo
p
ment of the network, subscriber base and othe
r
c
ritical inputs of the discounted cash flow model were based on a combination of average marketplace participant
d
ata an
d
our
hi
stor
i
ca
l
resu
l
ts an
db
us
i
ness p
l
ans. T
h
e
di
scount rate use
di
nt
h
emo
d
e
l
represents a we
igh
te
d
avera
g
e
c
ost of capital takin
g
into account our cost of debt and equit
y
financin
g
wei
g
hted b
y
the percenta
g
e of debt and
e
quity in our target capital structure and the perceived risk associated with an intangible asset such as our spectru
m
li
censes. T
h
e term
i
na
l
va
l
ue growt
h
rate represents our est
i
mate o
f
t
h
e mar
k
etp
l
ace’s
l
ong term growt
h
rate. We
h
a
d
n
o impairment of our indefinite lived intan
g
ible assets in an
y
of the periods presented. If the pro
j
ected rate of
g
rowth
of revenues and capital expenditures were to decline by 5%, the fair values of the licenses, while less than currently
p
ro
j
ecte
d
, wou
ld
st
ill b
e
hi
g
h
er t
h
an t
h
e
i
r
b
oo
k
va
l
ues. T
h
e account
i
ng est
i
mates
f
or our
i
ntang
ibl
e assets w
i
t
h
i
ndefinite useful lives require mana
g
ement to make si
g
nificant assumptions about fair value based on forecaste
d
c
as
hfl
ows t
h
at cons
id
er our
b
us
i
ness an
d
tec
h
no
l
ogy strategy, management’s v
i
ews o
f
growt
h
rates
f
or t
h
e
b
us
i
ness,
ant
i
c
i
pate
df
uture econom
i
can
d
regu
l
atory con
di
t
i
ons an
d
expecte
d
tec
h
no
l
og
i
ca
l
ava
il
a
bili
ty. I
f
t
h
ere
i
sa
s
u
b
stant
i
a
l
a
d
verse
d
ec
li
ne
i
nt
h
e operat
i
n
g
pro
fi
ta
bili
t
y
o
f
t
h
ew
i
re
l
ess serv
i
ce
i
n
d
ustr
y
, we cou
ld h
ave mater
i
a
l
i
mpairment charges in future years which could adversely affect our results of operations and financial condition.
I
m
p
airments o
f
Long-
l
ive
d
Assets
We rev
i
ew our
l
on
g
-
li
ve
d
assets to
b
e
h
e
ld
an
d
use
d
,
i
nc
l
u
di
n
g
propert
y
,p
l
ant an
d
equ
i
pment, w
hi
c
h
we re
f
e
r
t
o as PP&E, and intan
g
ible assets with definite useful lives, which consists primaril
y
of spectrum licenses wit
h
d
e
fi
n
i
te
li
ves,
f
or recovera
bili
ty w
h
enever an event or c
h
ange
i
nc
i
rcumstances
i
n
di
cates t
h
at t
h
e carry
i
ng amount o
f
s
uc
hl
on
g
-
li
ve
d
asset or
g
roup o
fl
on
g
-
li
ve
d
assets ma
y
not
b
e recovera
bl
e. Suc
h
c
i
rcumstances
i
nc
l
u
d
e,
b
ut are not
limited to the followin
g:
•asi
g
nificant decrease in the market price of the asset
;
•as
i
gn
ifi
cant c
h
ange
i
nt
h
e extent or manner
i
nw
hi
c
h
t
h
e asset
i
s
b
e
i
ng use
d;
5
0
C
LEARWIRE
CO
RP
O
RATI
O
N AND
SU
B
S
IDIARIE
S
MANA
G
EMENT’
S
DI
SCUSS
I
O
N AND ANALY
S
I
SO
F FINAN
C
IAL
CO
NDITI
O
N
A
ND RESULTS OF OPERATIONS —
(
Continued
)