iHeartMedia 2004 Annual Report Download - page 68

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.
Barter transactions represent the exchange of airtime, display space or tickets for merchandise or services. These transactions are generally
recorded at the fair market value of the airtime, display space or tickets relinquished or the fair value of the merchandise or services received.
Revenue is recognized on barter and trade transactions when the advertisements are broadcasted or displayed, or the event occurs for which the
tickets are exchanged. Expenses are recorded ratably over a period that estimates when the merchandise, service received is utilized or the
event occurs. Barter and trade revenues for the years ended December 31, 2004, 2003 and 2002, were approximately $169.9 million,
$170.3 million and $144.4 million, respectively, and are included in total revenues. Barter and trade expenses for the years ended
December 31, 2004, 2003 and 2002, were approximately $177.0 million, $167.8 million and $145.9 million, respectively, and are included in
divisional operating expenses.
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.
Derivative Instruments and Hedging Activities
Financial Accounting Standard No. 133, Accounting for Derivative Instruments and Hedging Activities, (“Statement 133”), requires the
Company to recognize all of its derivative instruments as either assets or liabilities in the consolidated balance sheet at fair value. The
accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging
relationship, and further, on the type of hedging relationship. For derivative instruments that are designated and qualify as hedging instruments,
the Company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge or a hedge
of a net investment in a foreign operation. The Company formally documents all relationships between hedging instruments and hedged items,
as well as its risk management objectives and strategies for undertaking various hedge transactions. The Company formally assesses, both at
inception and at least quarterly thereafter, whether the derivatives that are used in hedging transactions are highly effective in offsetting
changes in either the fair value or cash flows of the hedged item. If a derivative ceases to be a highly effective hedge, the Company
discontinues hedge accounting. The Company accounts for its derivative instruments that are not designated as hedges at fair value, with
changes in fair value recorded in earnings. The Company does not enter into derivative instruments for speculation or trading purposes. See
Note G for a discussion of the Company’s specific derivative instruments and hedging activities.
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.
Advertising Expense
The Company records advertising expense as it is incurred. Advertising expenses of $353.2 million, $294.0 million and $256.4 million were
recorded during the year ended December 31, 2004, 2003 and 2002, respectively.
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 statements and accompanying notes including, but not limited to,
legal, tax and insurance accruals. The Company bases its estimates on historical experience and on various other assumptions that are believed
to be reasonable under the circumstances. Actual results could differ from those estimates.
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