iHeartMedia 2009 Annual Report Download - page 76

Tax Accruals
The IRS and other taxing authorities routinely examine our tax returns we file as part of the consolidated tax returns filed
by CCMH. From time to time, the IRS challenges certain of our tax positions. We believe our tax positions comply with applicable
tax law and we would vigorously defend these positions if challenged. The final disposition of any positions challenged by the IRS
could require us to make additional tax payments. We believe that we have adequately accrued for any foreseeable payments resulting
from tax examinations and consequently do not anticipate any material impact upon their ultimate resolution.
Our estimates of income taxes and the significant items giving rise to the deferred assets and liabilities are shown in the
notes to our consolidated financial statements and reflect our assessment of actual future taxes to be paid on items reflected in the
financial statements, giving consideration to both timing and probability of these estimates. Actual income taxes could vary from
these estimates due to future changes in income tax law or results from the final review of our tax returns by Federal, state or foreign
tax authorities.
We have considered these potential changes in accordance with ASC 740-10, which requires us to record reserves for
estimates of probable settlements of Federal and state tax audits.
Litigation Accruals
We are currently involved in certain legal proceedings and, as required, have accrued our estimate of the probable costs for
the resolution of these claims.
Management’s estimates used have been developed in consultation with counsel and are based upon an analysis of
potential results, assuming a combination of litigation and settlement strategies.
It is possible, however, that future results of operations for any particular period could be materially affected by changes in
our assumptions or the effectiveness of our strategies related to these proceedings. During 2009, we recorded a $23.5 million accrual
related to an unfavorable outcome of litigation concerning a breach of contract regarding internet advertising and our radio stations.
Insurance Accruals
We are currently self-insured beyond certain retention amounts for various insurance coverages, including general liability
and property and casualty. Accruals are recorded based on estimates of actual claims filed, historical payouts, existing insurance
coverage and projected future development of costs related to existing claims.
Our self-insured liabilities contain uncertainties because management must make assumptions and apply judgment to
estimate the ultimate cost to settle reported claims and claims incurred but not reported as of December 31, 2009.
If actual results are not consistent with our assumptions and judgments, we may be exposed to gains or losses that could be
material. A 10% change in our self-insurance liabilities at December 31, 2009, would have affected our net loss by approximately
$2.8 million for the year ended December 31, 2009.
Asset Retirement Obligations
ASC 410-20 requires us to estimate our obligation upon the termination or nonrenewal of a lease, to dismantle and remove
our billboard structures from the leased land and to reclaim the site to its original condition. We record the present value of
obligations associated with the retirement of tangible long-lived assets in the period in which they are incurred. When the liability is
recorded, the cost is capitalized as part of the related long-lived asset’s carrying amount. Over time, accretion of the liability is
recognized as an operating expense and the capitalized cost is depreciated over the expected useful life of the related asset.
Due to the high rate of lease renewals over a long period of time, our calculation assumes all related assets will be removed
at some period over the next 50 years. An estimate of third-party cost information is used with respect to the dismantling of the
structures and the reclamation of the site. The interest rate used to calculate the present value of such costs over the retirement period
is based on an estimated risk-adjusted credit rate for the same period. If our assumption of the risk-adjusted credit rate used to
discount current year additions to the asset retirement obligation decreased approximately 1%, our liability as of December 31, 2009
would increase approximately $0.2 million. Similarly, if our assumption of the risk-adjusted credit rate increased approximately 1%,
our liability would decrease approximately $0.1 million.
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