iHeartMedia 2001 Annual Report Download - page 72

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72
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, the Company holds investments that do not have quoted market prices. The
Company reviews the value of available-for-sale, trading and non-marketable securities and records
impairment charges in the statement of operations for any decline in value that is determined to be other-
than-temporary. The average cost method is used to compute the realized gains and losses on sales of
equity securities.
Equity Method Investments
Investments in which the Company owns 20 percent to 50 percent of the voting common stock or
otherwise exercises significant influence over operating and financial policies of the company are
accounted for under the equity method. The Company does not recognize gains or losses upon the
issuance of securities by any of its equity method investees. The Company reviews the value of equity
method investments and records impairment charges in the statement of operations for any decline in
value that is determined to be other-than-temporary.
Financial Instruments
Due to their short maturity, the carrying amounts of accounts and notes receivable, accounts payable,
accrued liabilities, and short-term borrowings approximated their fair values at December 31, 2001 and
2000. The carrying amounts of long-term debt approximated their fair value at the end of 2001 and 2000.
Income Taxes
The Company accounts for income taxes using the liability method. Under this method, deferred tax
assets and liabilities are determined based on differences between financial reporting bases and tax bases
of assets and liabilities and are measured using the enacted tax rates expected to apply to taxable income
in the periods in which the deferred tax asset or liability is expected to be realized or settled. Deferred
tax assets are reduced by valuation allowances if the Company believes it is more likely than not that
some portion or all of the asset will not be realized. As all earnings from the Company’s foreign
operations are permanently reinvested and not distributed, the Company’s income tax provision does not
include additional U.S. taxes on foreign operations.
Revenue Recognition
Revenue is reported net of agency commissions. Agency commissions are calculated based on a stated
percentage applied to gross billing revenue for the Company’s broadcasting and outdoor operations.
Clients remit the gross billing amount to the agency and the agency remits gross billings less their
commission to the Company.
Radio broadcasting revenue is recognized as advertisements or programs are broadcast and is generally
billed monthly. Outdoor advertising provides services under the terms of contracts covering periods up
to three years, which are generally billed monthly. Revenue for outdoor advertising space rental is
recognized ratably over the term of the contract. Payments received in advance of billings are recorded
as deferred income. Entertainment revenue from the presentation and production of an event is
recognized on the date of the performance. Revenue collected in advance of the event is recorded as
deferred income until the event occurs. Entertainment revenue collected from advertising and other