iHeartMedia 2002 Annual Report Download - page 72

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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 the Company’s balance sheet related to acquired liabilities and qualifying
restructuring costs based on assumptions made at the time of acquisition. The Company evaluates these reserves on a regular basis to determine
the adequacies of the amounts.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method at rates that, in the opinion of
management, are adequate to allocate the cost of such assets over their estimated useful lives, which are as follows:
Expenditures for maintenance and repairs are charged to operations as incurred, whereas expenditures for renewal and betterments are
capitalized.
The Company tests for possible impairment of property, plant, and equipment whenever events or changes in circumstances, such as a
reduction in operating cash flow or a dramatic change in the manner that the asset is intended to be used indicate that the carrying amount of
the asset is not recoverable. If indicators exist, the Company compares the undiscounted cash flows related to the asset to the carrying value of
the asset. If the carrying value is greater than the undiscounted cash flow amount, an impairment charge is recorded in depreciation expense in
the statement of operations for amounts necessary to reduce the carrying value of the asset to fair value.
Intangible Assets
The Company classifies intangible assets as definite-lived or indefinite-lived intangible assets, as well as goodwill. Definite-lived intangibles
include primarily transit and street furniture contracts, talent, and representation contracts, all of which are amortized over the respective lives
of the agreements, typically four to fifteen years. The Company periodically reviews the appropriateness of the amortization periods related to
its definite-lived assets. These assets are stated at cost. Indefinite-lived intangibles include broadcast FCC licenses and billboard permits. The
excess cost over fair value of net assets acquired is classified as goodwill. The indefinite-lived intangibles and goodwill are not subject to
amortization, but are tested for impairment at least annually.
The Company tests for possible impairment of definite-lived intangible assets whenever events or changes in circumstances, such as a
reduction in operating cash flow or a dramatic change in the manner that the asset is intended to be used indicate that the carrying amount of
the asset is not recoverable. If indicators exist, the Company compares the undiscounted cash flows related to the asset to the carrying value of
the asset. If the carrying value is greater than the undiscounted cash flow amount, an impairment charge is recorded in amortization expense in
the statement of operations for amounts necessary to reduce the carrying value of the asset to fair value.
At least annually, the Company performs its impairment test for indefinite-lived intangibles and goodwill using a discounted cash flow model
to determine the assets’fair value. Certain assumptions are used in determining the fair value, including assumptions about the cash flow
growth rates of the Company’s businesses. Additionally, the fair values are significantly impacted by macro-economic factors including market
multiples and long-term interest rates that exists at the time that the discounted cash flows models are prepared. Impairment charges, other than
the charge taken under the transitional rules of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, are recorded in
amortization expense in the statement of operations.
66
Buildings and improvements —10 to 39 years
Structures and site leases —5to40years,orlifeoflease
Towers, transmitters and studio equipment —7to20years
Furniture and other equipment —3to20years
Leasehold improvements
—
generally life of lease