iHeartMedia 2002 Annual Report Download - page 60

No. 148 amends Financial Accounting Standards No. 123, Account for Stock-Based Compensation, to provide alternative methods of transition
to Statement No. 123’s fair value method of accounting for stock-based employee compensation. Statement No. 148 also amends the disclosure
provisions of Statement No. 123 and Accounting Principals Board Opinion No. 28, Interim Financial Reporting, to require disclosures in the
summary of significant accounting policies of the effects of an entity’s accounting policy with respect to stock-based employee compensation
on reported net income and earnings per share in annual and interim financial statements. Statement No. 148 does not amend Statement
No. 123 to require companies to account for employee stock options using the fair value method. We adopted the disclosure provisions
required in Statement 148 and have provided the necessary disclosures within Note J of our audited financial statements.
Critical Accounting Policies
The preparation of the Company’s financial statements in conformity Generally Accepted Accounting Principles requires management to
make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of a financial statements and the reported amount of expenses during the reporting period. On an ongoing basis, we
evaluate our estimates that are based on historical experience and on various other assumptions that are believed to be reasonable under the
circumstances. The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the
reported amount of expenses that are not readily apparent from other sources. Actual results may differ from these estimates under different
assumptions. The following accounting policies require significant management judgments and estimates.
Allowance for Doubtful Accounts
We evaluate the collectibility of our accounts receivable based on a combination of factors. In circumstances where we are aware of a
specific customer’s inability to meet its financial obligations, we record a specific reserve to reduce the amounts recorded to what we believe
will be collected. For all other customers, we recognize reserves for bad debt based on historical experience of bad debts as a percent of
revenues for each business unit, adjusted for relative improvements or deteriorations in the agings and changes in current economic conditions.
Revenue Recognition
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. Advertising revenue is reported net of agency commissions. Agency
commissions are calculated based on a stated percentage applied to gross billing revenue for our 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. Payments received in
advance of being earned 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 revenue,
which is not related to any single event, is classified as deferred revenue and generally amortized over the operating season or the term of the
contract.
Purchase Accounting
We account for our business acquisitions under the purchase method of accounting. The total cost of acquisitions is allocated to the
underlying net assets, based on their respective estimated fair values. The excess of the purchase price over the estimated fair values of the net
assets acquired is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment
and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows,
discount rates, asset lives and market multiples, among other items. In addition, reserves have been established on our balance sheet related to
acquired liabilities and qualifying restructuring costs based on assumptions made at the time of acquisition. We evaluate these reserves on a
regular basis to determine the adequacies of the amounts.
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