iHeartMedia 2007 Annual Report Download - page 72

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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.
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 income”. 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 from continuing operations of $137.4 million, $128.9 million
and $153.2 million were recorded during the years ended December 31, 2007, 2006 and 2005, respectively as a component of selling, general
and administrative expenses.
Use of Estimates
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to
make estimates, judgments, and assumptions that affect the amounts reported in the consolidated 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.
Certain Reclassifications
The Company has reclassified certain selling, general and administrative expenses to direct operating expenses in 2006 and 2005 to conform to
current year presentation. The historical financial statements and footnote disclosures have been revised to exclude amounts related to the
Company’s television business, certain radio stations and Live Nation as discussed below.
New Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement No. 157, Fair Value Measurements (“Statement
157”). Statement 157 defines fair value, establishes a framework for measuring fair value and expands disclosure requirements for fair value
measurements. Statement 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. Statement
157 does not expand the use of fair value in any new circumstances. Companies will need to apply the recognition and disclosure provisions of
Statement 157 for financial assets and financial liabilities and for nonfinancial assets and nonfinancial liabilities that are remeasured at least
annually effective January 1, 2008. The effective date in Statement 157 is delayed for one year for certain nonfinancial assets and nonfinancial
liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).
Excluded from the scope of Statement 157 are certain leasing transactions accounted for under FASB Statement No. 13, Accounting for Leases.
The exclusion does not apply to fair value measurements of assets and liabilities recorded as a result of a lease transaction but measured
pursuant to other pronouncements within the scope of Statement 157. The Company is currently evaluating the impact of adopting FAS 157 on
our financial position or results of operations.
Statement of Financial Accounting Standards No. 141(R), Business Combinations (“Statement 141(R)”), was issued in December 2007.
Statement 141(R) requires that upon initially obtaining control, an acquirer will recognize 100% of the fair values of acquired assets, including
goodwill, and assumed liabilities, with only limited exceptions, even
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