Earthlink 2007 Annual Report Download - page 181

HELIO, INC. and HELIO LLC
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies (Continued)
In accordance with Emerging Issues Task Force No. 02-7, Unit of Accounting for Testing Impairment of Indefinite Lived Intangible Assets,
the Company tests its goodwill on an aggregate basis, consistent with the Company's management of its business. The Company uses a fair value
approach, incorporating discounted cash flows, to complete the test. During the periods ended December 31, 2005, 2006 and 2007, the
Company's tests indicated its goodwill and other indefinite life intangible assets were not impaired.
From inception to December 31, 2005 and for the years ended December 31, 2006 and 2007, the Company recognized amortization expense
of approximately $5.8 million, $9.9 million and $8.9 million (excluding the $3.1 million impairment charge discussed above), respectively,
related to its finite-lived intangible assets.
Valuation of Long-lived Assets
Long-lived assets, including property and equipment and intangible assets with finite lives are reviewed for impairment in accordance with
Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets
("SFAS 144") whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. It is reasonably possible that these assets could
become impaired as a result of technological or other industry changes. In analyzing potential impairments, the Company uses projections of
future cash flows. These projections are based upon the Company's views of forecasted growth rates, anticipated future economic conditions,
appropriate discount rates relative to risk and estimates of residual values. If the total of the expected future undiscounted cash flows from the
assets is less than its carrying amount, a loss is recognized for the difference between the fair value and its carrying amount. The asset group
represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and or liabilities.
Leases
The Company accounts for lease agreements in accordance with Statement of Financial Accounting Standards No. 13, Accounting for
Leases
, which requires categorization of leases at their inception as either operating or capital leases depending on certain criteria. The
Company recognizes rent expense for operating leases on a straight-line basis over the lease term. The Company records leasehold
improvements funded by landlords under operating leases as leasehold improvements.
Stock Based Compensation
In December 2004, the Financial Accounting Standard Board issued SFAS No. 123(R), Share Based Payment ("SFAS 123(R)"), which
replaced SFAS No. 123, Stock Based Compensation ("SFAS 123") and superseded Accounting Principles Board ("APB") Opinion No. 25,
Employee Based Stock Compensation.
Prior to the adoption of SFAS 123(R), the Company accounted for its employee stock-
based awards using
the intrinsic value method in accordance with APB 25, as allowed under SFAS 123. Under the intrinsic method, no employee stock-based
compensation was recognized in the Company's statements of operations prior to January 1, 2006. Under the modified prospective transition
method as prescribed under SFAS 123(R) and adopted by the Company effective January 1, 2006, the combined financial statements prior to
2006 were not restated to reflect, and do not include, the impact of adopting SFAS 123(R).
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