iHeartMedia 2004 Annual Report Download - page 39

As a result, we received shares of Univision, which we recorded on our balance sheet at the date of the merger at their fair value. The exchange
of our Hispanic investment, which was accounted for as an equity method investment, into our Univision investment, which was recorded as an
available-for-sale cost investment, resulted in a $657.3 million pre-tax book gain. In addition, on September 23, 2003, we sold a portion of our
Univision investment, which resulted in a pre-tax book loss of $6.4 million. Also during 2003, we recorded a $37.1 million gain related to the
sale of a marketable security, a $2.5 million loss on a forward exchange contract and its underlying investment, and an impairment charge on a
radio technology investment for $7.0 million due to a decline in its market value that we considered to be other-than-temporary.
Other Income (Expense) - Net
The principal components of other income (expense) – net for the years ended December 31, 2004 and 2003 were:
I
ncome Taxes
Current tax expense in 2004 increased $87.5 million as compared to 2003. Current tax expense for the year ended December 31, 2004
increased $199.4 million related to our sale of our remaining investment in Univision and certain radio operating assets. This expense was
partially offset by an approximate $67.5 million benefit related to a tax loss on our early extinguishment of debt and $34.1 million related to
the reversal of accruals associated with tax contingencies. Current tax expense for the year ended December 31, 2003 includes $119.7 million
primarily related to the sale of a portion of our Univision investment.
Deferred tax expense decreased $348.9 million in 2004 as compared to 2003. Deferred tax expense for the year ended December 31, 2004
includes a $176.0 million deferred tax benefit related to our sale of our remaining investment in Univision. This benefit was partially offset by
an approximate $54.3 million expense related to our early extinguishment of debt. Deferred tax expense for the year ended December 31, 2003
includes $158.0 million related to our conversion of our investment in Hispanic to Univision.
The effective tax rate for 2004 is 38.0% as compared to 40.5% for 2003. We expect an effective tax rate of 39.5% in 2005.
Cumulative Effect of a Change in Accounting Principle
The SEC staff issued Staff Announcement No. D-108, Use of the Residual Method to Value Acquired Assets Other Than Goodwill,atthe
September 2004 meeting of the Emerging Issues Task Force. The Staff Announcement states that the residual method should no longer be used
to value intangible assets other than goodwill. Rather, a direct method should be used to determine the fair value of all intangible assets other
than goodwill required to be recognized under Statement of Financial Accounting Standards No. 141, Business Combinations. Registrants who
have applied a method other than a direct method to the valuation of intangible assets other than goodwill for purposes of impairment testing
under Statement of Financial Accounting Standards No 142, Goodwill and Other Intangible Assets, shall perform an impairment test using a
direct value method on all intangible assets other than goodwill that were previously valued using another method by no later than the
beginning of their first fiscal year beginning after December 15, 2004.
Our adoption of the Staff Announcement in the fourth quarter of 2004 resulted in an aggregate carrying value of our FCC licenses and
outdoor permits that was in excess of their fair value. The Staff Announcement requires us to report the excess value of $4.9 billion, net of tax,
as a cumulative effect of a change in accounting principle.
36
(In millions) 2004 2003
Gain (loss) on early extinguishment of debt $(31.6) $ 36.7
Gain (loss) on sale of operating and fixed assets 22.2 10.0
Transitional asset retirement obligation ¯(7.0)
Other, ne
t
(4.5) (18.7)
Other income (expense) - ne
t
$(13.9) $ 21.0