iHeartMedia 2009 Annual Report Download - page 74

FASB Staff Position No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary
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mpairments, codified in ASC 320-10-35, was issued in April 2009. It amends the other-than-temporary impairment guidance in U.S.
GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-
temporary impairments on debt and equity securities in the financial statements. ASC 320-10-35 does not amend existing recognition
and measurement guidance related to other-than-temporary impairments of equity securities. This guidance is effective for interim
and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009.
Earlier adoption for periods ending before March 15, 2009 is not permitted. We adopted the provisions of ASC 320-10-35 on April 1,
2009 with no material impact to our financial position or results of operations.
FASB Staff Position No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments,
codified in ASC 825-10-50, was issued in April 2009. ASC 825-10-50 amends prior authoritative guidance to require disclosures
about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial
statements. The provisions of ASC 825-10-50 are effective for interim reporting periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009. We adopted the disclosure requirements of ASC 825-10-50 on April 1,
2009.
Inflation
Inflation is a factor in the economies in which we do business and we continue to seek ways to mitigate its effect. Inflation
has affected our performance in terms of higher costs for wages, salaries and equipment. Although the exact impact of inflation is
indeterminable, we believe we have offset these higher costs by increasing the effective advertising rates of most of our broadcasting
stations and outdoor display faces.
Critical Accounting Estimates
The preparation of our financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”)
requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during the
reporting period. On an ongoing basis, we evaluate our estimates that are based on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances. The result of these evaluations forms the basis for making
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udgments about the carrying values of assets and liabilities and the reported amount of expenses that are not readily apparent from
other sources. Because future events and their effects cannot be determined with certainty, actual results could differ from our
assumptions and estimates, and such difference could be material. Our significant accounting policies are discussed in the notes to our
consolidated financial statements, included in Item 8 of this Annual Report on Form 10-K. Management believes that the following
accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and they require
management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters
that are inherently uncertain. The following narrative describes these critical accounting estimates, the judgments and assumptions
and the effect if actual results differ from these assumptions.
Allowance for Doubtful Accounts
We evaluate the collectability of our accounts receivable based on a combination of factors. In circumstances where we are
aware of a specific customer’s inability to meet its financial obligations, we record a specific reserve to reduce the amounts recorded
to what we believe will be collected. For all other customers, we recognize reserves for bad debt based on historical experience of bad
debts as a percent of revenue for each business unit, adjusted for relative improvements or deteriorations in the agings and changes in
current economic conditions.
If our agings were to improve or deteriorate resulting in a 10% change in our allowance, we estimated that our bad debt
expense for the year ended December 31, 2009, would have changed by approximately $7.2 million and our net loss for the same
period would have changed by approximately $4.4 million.
Long-Lived Assets
Long-lived assets, such as property, plant and equipment and definite-lived intangibles are reviewed for impairment when
events and circumstances indicate that depreciable and amortizable long-lived assets might be impaired and the undiscounted cash
flows estimated to be generated by those assets are less than the carrying amount of those assets. When specific assets are determined
to be unrecoverable, the cost basis of the asset is reduced to reflect the current fair market value.
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