XO Communications 2009 Annual Report Download - page 39

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consideration to existing and anticipated competitive economic conditions. Other assumptions include our
estimated weighted average cost of capital and long-term rate of growth for our business.
Goodwill is tested by comparing the fair value of a reporting unit with its carrying amount including goodwill.
If the carrying value of the reporting unit exceeds fair value, the second step of the goodwill impairment test
is performed to measure the impairment loss, if any. Our indefinite-lived intangible assets are tested in a
manner similar to our goodwill. We estimate the fair value of our indefinite-lived intangible assets using a
discounted cash flow model. If the carrying value exceeds its fair value, the carrying value of the asset is
reduced to its fair value, resulting in an impairment charge. Any impairment loss determined by our analysis
would be recorded as a reduction in the carrying value of the related goodwill or indefinite-lived intangible
asset and charged to results of operations.
As a result of integrating our Nextlink segment into our existing service offerings, we performed an
impairment evaluation of our LMDS licenses as of May 31, 2009. Based on this evaluation, we determined
that the fair value of the LMDS licenses was less than the carrying value. Accordingly,LMDS licenses with a
carrying amount of $35.8 million were written down to their fair value of $27.5 million, resulting in an
impairment charge of $8.3 million.
We performed another impairment evaluation on goodwill and indefinite-lived intangible assets at October 1,
2009 and concluded that no additional impairment charge was required. There were no impairments of
goodwill or indefinite-lived assets as of December 31, 2008 or 2007. Although we believe our accounting
policies are designed to properly analyze our goodwill and indefinite-lived intangible assets for impairment, if
actual results are not consistent with our assumptions and estimates, we may be required to record additional
impairment charges in future periods.
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