iHeartMedia 2001 Annual Report Download - page 74

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74
of its investment in American Tower Corporation ("AMT") that had been classified as available-for-sale
securities to trading securities under Financial Accounting Standards No. 115 Accounting for Certain
Investments in Debt and Equity Securities ("Statement 115"). In accordance with Statement 115 and
Statement 133, the shares were transferred to a trading classification at their fair market value on January
1, 2001, of $76.2 million, and an unrealized pretax holding gain of $69.7 million was recorded in
earnings as "Gain on marketable securities".
On July 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 141, Business
Combinations ("Statement 141"). Statement 141 addresses financial accounting and reporting for
business combinations and supersedes APB Opinion No. 16, Business Combinations, and FASB
Statement 38, Accounting for Preacquisition Contingencies of Purchased Enterprises. Statement 141 is
effective for all business combinations initiated after June 30, 2001. Statement 141 eliminates the
pooling-of-interest method of accounting for business combinations except for qualifying business
combinations that were initiated prior to July 1, 2001. Statement 141 also changes the criteria to
recognize intangible assets apart from goodwill. As the Company has historically used the purchase
method to account for all business combinations, adoption of this statement did not have a material
impact on the Company's financial position or results of operations.
In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets ("Statement 142"). Statement 142 addresses
financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB
Opinion No. 17, Intangible Assets. Statement 142 is effective for fiscal years beginning after December
15, 2001. This statement establishes new accounting for goodwill and other intangible assets recorded in
business combinations. Under the new rules, goodwill and intangible assets deemed to have indefinite
lives will no longer be amortized but will be subject to annual impairment tests in accordance with the
statement. Other intangible assets will continue to be amortized over their useful lives. Under this
guidance, the Company believes broadcast licenses are indefinite-lived intangibles. As the Company's
amortization of goodwill and certain other indefinite-lived intangibles is a significant non-cash expense
that the Company currently records, Statement 142 will have a material impact on the Company's
financial statements. Amortization expense related to goodwill and indefinite-lived intangibles was
approximately $1.8 billion for the year ended December 31, 2001. The Company will test goodwill for
impairment using a two-step process. The first step is a screen for potential impairment, while the
second step measures the amount of impairment, if any. The Company expects to perform the first of the
required impairment tests of goodwill and indefinite-lived intangible assets as of January 1, 2002 in the
first quarter of 2002. As a result of these tests, the Company expects to record a pre-tax impairment
charge in the range of $15.0 billion to $25.0 billion, which will be reported after-tax as a cumulative
effect in accounting change on the statement of operations for the quarter ended March 31, 2002.
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").
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 121").
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. The
Company does not believe adoption of this statement will materially impact the Company's financial
position or results of operations.