iHeartMedia 2002 Annual Report Download - page 74

The Company believes that the credit risk, with respect to trade receivables is limited due to the large number and the geographic
diversification of its customers.
Interest Rate Protection Agreements
Periodically, the Company enters into interest rate swap agreements to modify the interest characteristics of its outstanding debt. As each
interest rate swap agreement is designated with all or a portion of the principal balance and term of a specific debt obligation, the Company
accounts for these interest rate swaps using the short-cut method in accordance with Financial Accounting Standard No. 133, Accounting for
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erivative Instruments and Hedging Activities,(“Statement 133”). These agreements involve the exchange of amounts based on a fixed interest
rate for amounts based on variable interest rates over the life of the agreement without an exchange of the notional amount upon which the
payments are based. The differential to be paid or received as interest rates change is accrued and recognized as an adjustment to interest
expense related to the debt. The fair value of the swap agreements and changes in the fair value as a result of changes in market interest rates
are recognized in these consolidated financial statements.
Foreign Currency
Results of operations for foreign subsidiaries and foreign equity investees are translated into U.S. dollars using the average exchange rates
during the year. The assets and liabilities of those subsidiaries and investees, other than those of operations in highly inflationary countries, are
translated into U.S. dollars using the exchange rates at the balance sheet date. The related translation adjustments are recorded in a separate
component of shareholders’equity, “Accumulated other comprehensive loss”. Foreign currency transaction gains and losses, as well as gains
and losses from translation of financial statements of subsidiaries and investees in highly inflationary countries, are included in operations.
Stock Based Compensation
The Company accounts for its stock-based award plans in accordance with Accounting Principles Board (“APB”) Opinion No. 25, Accounting
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or Stock Issued to Employees, and related interpretations, under which compensation expense is recorded to the extent that the current market
price of the underlying stock exceeds the exercise price. Note J provides the assumptions used to calculate the pro forma net income (loss) and
pro forma earnings (loss) per share disclosures as if the stock-based awards had been accounted for using the provisions of Statement of
Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation. The required pro forma disclosures are as
follows:
(in thousands, except per share data)
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates,
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udgments, and assumptions that affect the amounts reported in the financial
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2002 2001 2000
Net income (loss) before extraordinary item
As reported $724,823 $(1,144,026) $248,808
Pro Forma $672,212 $(1,193,495) $219,898
Net income (loss) before extraordinary item per common
share
Basic:
As reported $ 1.20 $ (1.93) $ .59
Pro Forma $1.11 $(2.02) $ .52
Net income (loss) before extraordinary item per common
share
Diluted:
As reported $ 1.18 $ (1.93) $ .57
Pro Forma $1.10 $(2.02) $ .50