iHeartMedia 2001 Annual Report Download - page 60

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60
In August 2001, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
Statement 144 addresses financial accounting and reporting for the impairment or disposal of long-lived
assets. This statement supersedes Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of. Statement 144 is effective
for fiscal years beginning after December 15, 2001. Statement 144 removes goodwill from its scope and
retains the requirements of Statement 121 regarding the recognition of impairment losses on long-lived
assets held for use. The Statement modifies the accounting for long-lived assets to be disposed of by sale
and long-lived assets to be disposed of by other than by sale. We do not believe adoption of this
statement will materially impact our financial position or results of operations.
Critical Accounting Policies
Critical account policies are defined as those that are reflective of significant judgments and
uncertainties, and potentially result in materially different results under different assumptions and
conditions. We believe that our critical accounting policies are limited to those described below. For a
detailed discussion on the application of these and other accounting policies, see Note A in the notes to
the consolidated financial statements.
Impairment of Long-Lived Assets
We record impairment losses when events and circumstances indicate that long-lived assets
might be impaired and the undiscounted cash flow estimated to be generated by those assets are less than
the carrying amount of those assets. When specific assets are determined to be unrecoverable, the cost
basis of the assets is reduced to reflect their current fair market value. During 2001, we recorded
impairment charges of approximately $170.0 million related to the write-off of duplicative and excess
assets identified primarily in our radio segment, the impairment of goodwill and excess property, plant
and equipment within our outdoor segment, and an on-air talent contract within our radio segment. The
fair values of the goodwill and the on-air talent contract were determined based on discounted cash flow
models and assumptions of future expected cash flows, and the fair values related to property, plant and
equipment were based on estimated cash proceeds.
We considered the current economic recession as an impairment indicator during the fourth
quarter of fiscal 2001. As a result, we performed a recoverability assessment of all of our long-lived
assets using an undiscounted cash flow model. Based on our assumptions, all long-lived assets, other
than those mentioned above, were determined to be recoverable.
Impairment of Investments
At December 31, 2001, we have $354.3 million recorded as other investments. Other
investments are composed primarily of equity securities. These securities are classified as available-for-
sale or trading and are carried at fair value based on quoted market prices. Securities are carried at
historical value when quoted market prices are unavailable. The net unrealized gains or losses on the
available-for-sale securities, net of tax, are reported as a separate component of shareholders’ equity.
The net unrealized gains or losses on the trading securities are reported in the statement of operations. In
addition, we hold investments that do not have quoted market prices. We review the value of these
investments and record an impairment charge in the statement of operations for any decline in value that
is determined to be other-than-temporary. During 2001, we recorded impairments of $67.3 million
related to investments where declines in fair value below cost were considered to be other-than-
temporary.