iHeartMedia 2004 Annual Report Download - page 71

Total amortization expense from definite-lived intangible assets for the years ended December 31, 2004, 2003 and 2002 was $136.6 million,
$138.2 million and $137.1 million, respectively. The following table presents the Company’s estimate of amortization expense for each of the
five succeeding fiscal years for definite-lived intangible assets that exist at December 31, 2004:
As acquisitions and dispositions occur in the future and as purchase price allocations are finalized, amortization expense may vary.
I
ndefinite-lived Intangibles
The Company’s indefinite-lived intangible assets consist of FCC broadcast licenses and billboard permits. FCC broadcast licenses are granted
to both radio and television stations for up to eight years under the Telecommunications Act of 1996. The Act requires the FCC to renew a
broadcast license if: it finds that the station has served the public interest, convenience and necessity; there have been no serious violations of
either the Communications Act of 1934 or the FCC’s rules and regulations by the licensee; and there have been no other serious violations
which taken together constitute a pattern of abuse. The licenses may be renewed indefinitely at little or no cost. The Company does not believe
that the technology of wireless broadcasting will be replaced in the foreseeable future. The Company’s billboard permits are issued in
perpetuity by state and local governments and are transferable or renewable at little or no cost. Permits typically include the location for which
the permit allows the Company the right to operate an advertising structure. The Company’s permits are located on either owned or leased
land. In cases where the Company’s permits are located on leased land, the leases are typically from 10 to 30 years and renew indefinitely, with
rental payments generally escalating at an inflation based index. If the Company loses its lease, the Company will typically obtain permission
to relocate the permit or bank it with the municipality for future use.
The Company does not amortize its FCC broadcast licenses or billboard permits. The Company tests these indefinite-lived intangible assets for
impairment at least annually. The following table presents the carrying amount for each major class of indefinite-lived intangible assets at
December 31, 2004 and 2003:
The SEC staff issued D-108 at the September 2004 meeting of the Emerging Issues Task Force. D-108 states that the residual method should
no longer be used to value intangible assets other than goodwill. Rather, D-108 requires that a direct method be used to value intangible assets
other than goodwill. Prior to adoption of D-108, the Company recorded its acquisition at fair value using an industry accepted income
approach. The value calculated using the income approach was allocated to the indefinite-lived intangibles after deducting the value of tangible
and intangible assets, as well as estimated costs of establishing a business at the market level. The Company used a similar approach in its
annual impairment test prior to its adoption of D-108.
D-108 requires that an impairment test be performed upon adoption using a direct method for valuing intangible assets other than goodwill.
Under the direct method, it is assumed that rather than acquiring indefinite-lived intangible assets as a part of a going concern business, the
buyer hypothetically obtains indefinite-lived intangible assets and builds a new operation with similar attributes from scratch. Thus, the buyer
incurs start-up costs during the build-up phase which are normally associated with going concern value. Initial capital costs are deducted from
the discounted cash flows, (“DCF”) model which results in value that is directly attributable to the indefinite-lived intangible assets.
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(In thousands)
2005 $144,050
2006 123,516
2007 82,050
2008 40,999
2009 35,452
(In thousands) 2004 2003
FCC Licenses $4,323,297 $11,797,742
Billboard Permits 211,690 424,460
Total $4,534,987 $12,222,202