iHeartMedia 2005 Annual Report Download - page 64

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New Accounting Pronouncements
In March 2005, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 47, Accounting for
Conditional Asset Retirement Obligations (“FIN 47”). FIN 47 is an interpretation of FASB Statement 143,
Accounting for Asset Retirement Obligations, which was issued in June 2001. According to FIN 47, uncertainty
about the timing and (or) method of settlement because they are conditional on a future event that may or may not
be within the control of the entity, should be factored into the measurement of the asset retirement obligation when
sufficient information exists. FIN 47 also clarifies when an entity would have sufficient information to reasonably
estimate the fair value of an asset retirement obligation. FIN 47 is effective no later than the end of fiscal years
ending after December 15, 2005. Retrospective application of interim financial information is permitted, but is not
required. The Company adopted FIN 47 on January 1, 2005, which did not materially impact the Company’s
financial position or results of operations.
In March 2005, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 107 Share-
Based Payment (“SAB 107”). SAB 107 expresses the SEC staff’s views regarding the interaction between
Statement of Financial Accounting Standards No. 123(R) Share-Based Payment (“Statement 123(R)”) and certain
SEC rules and regulations and provides the staff’s views regarding the valuation of share-based payment
arrangements for public companies. In particular, SAB 107 provides guidance related to share-based payment
transactions with nonemployees, the transition from nonpublic to public entity status, valuation methods (including
assumptions such as expected volatility and expected term), the accounting for certain redeemable financial
instruments issued under share-based payment arrangements, the classification of compensation expense, non-
GAAP financial measures, first time adoption of Statement 123(R) in an interim period, capitalization of
compensation cost related to share-based payment arrangements, the accounting for income tax effects of share-
based payment arrangements upon adoption of Statement 123(R) and the modification of employee share options
prior to adoption of Statement 123(R).
In April 2005, the SEC issued a press release announcing that it would provide for phased-in implementation
guidance for Statement 123(R). The SEC would require that registrants that are not small business issuers adopt
Statement 123(R)’s fair value method of accounting for share-based payments to employees no later than the
beginning of the first fiscal year beginning after June 15, 2005. The Company will adopt Statement 123(R) on
January 1, 2006. The Company expects the impact of adopting SAB 107 and Statement 123(R) to be in the range of
$40.0 million to $50.0 million recorded as a component of operating expenses in its consolidated statement of
operations for the year ended December 31, 2006.
In May, 2005, the FASB issued Statement No. 154 Accounting Changes and Error Corrections (“Statement 154”).
This Statement replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting
Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and
reporting of a change in accounting principle. Statement 154 applies to all voluntary changes in accounting
principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the
pronouncement does not include specific transition provisions. When a pronouncement includes specific transition
provisions, those provisions should be followed. This Statement is effective for accounting changes and corrections
of errors made in fiscal years beginning after December 15, 2005. The Company will adopt Statement 154 on
January 1, 2006 and anticipates adoption will not materially impact its financial position or results of operations.
In June 2005, the EITF issued EITF 05-6, Determining the Amortization Period of Leasehold Improvements (“EITF
05-6”). EITF 05-6 requires that assets recognized under capital leases generally be amortized in a manner
consistent with the lessee’s normal depreciation policy except that the amortization period is limited to the lease
term (which includes renewal periods that are reasonably assured). EITF 05-6 also addresses the determination of
the amortization period for leasehold improvements that are purchased subsequent to the inception of the lease.
Leasehold improvements acquired in a business combination or purchased subsequent to the inception of the lease
should be amortized over the lesser of the useful life of the asset or the lease term that includes reasonably assured
lease renewals as determined on the date of the acquisition of the leasehold improvement. The Company adopted
EITF 05-6 on July 1, 2005 which did not materially impact its financial position or results of operations.