iHeartMedia 2009 Annual Report Download - page 91

Format of Presentation
The accompanying consolidated statements of operations, statements of cash flows and shareholders’ equity are presented for two
periods: post-merger and pre-merger. The merger resulted in a new basis of accounting beginning on July 31, 2008 and the financial
reporting periods are presented as follows:
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany
accounts have been eliminated in consolidation. Investments in companies in which the Company owns 20 percent to 50 percent of
the voting common stock or otherwise exercises significant influence over operating and financial policies of the company are
accounted for using the equity method of accounting.
The Company holds nontransferable, noncompliant station combinations pursuant to certain FCC rules or, in a few cases, pursuant to
temporary waivers. These noncompliant station combinations were placed in a trust in order to bring the merger into compliance with
the FCC’s media ownership rules. The Company will have to divest of certain stations in these noncompliant station combinations.
The trust will be terminated, with respect to each noncompliant station combination, if at any time the stations may be owned by the
Company under the then-current FCC media ownership rules. The trust agreement stipulates that the Company must fund any
operating shortfalls of the trust activities, and any excess cash flow generated by the trust is distributed to the Company. The
Company is also the beneficiary of proceeds from the sale of stations held in the trust. The Company consolidates the trust in
accordance with ASC 810-10, which requires an enterprise involved with variable interest entities to perform an analysis to determine
whether the enterprise’s variable interest or interests give it a controlling financial interest in the variable interest entity, as the trust
was determined to be a variable interest entity and the Company is its primary beneficiary.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments with an original maturity of three months or less.
Allowance for Doubtful Accounts
The Company evaluates the collectability of its accounts receivable based on a combination of factors. In circumstances where it is
aware of a specific customer’s inability to meet its financial obligations, it records a specific reserve to reduce the amounts recorded
to what it believes will be collected. For all other customers, it recognizes 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. The Company believes its concentration of credit risk is limited due to the large number and the
geographic diversification of its customers.
Land Leases and Other Structure Licenses
Most of the Company’s outdoor advertising structures are located on leased land. Americas outdoor land rents are typically paid in
advance for periods ranging from one to twelve months. International outdoor land rents are paid both in advance and in arrears, for
periods ranging from one to twelve months. Most international street furniture display faces are operated through contracts with the
municipalities for up to 20 years. The street furniture contracts often include a percent of revenue to be paid along with a base rent
payment. Prepaid land leases are recorded as an asset and expensed ratably over the related rental term and license and rent payments
in arrears are recorded as an accrued liability.
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• The year ended December 31, 2009 and the period from July 31 through December 31, 2008 reflect the post-merger period
of the Company, including the merger of a wholly-owned subsidiary of CCMH with and into Clear Channel. Subsequent to
the acquisition, Clear Channel became a direct, wholly-owned subsidiary of the Company and the business of the Company
became that of Clear Channel and its subsidiaries.
• The periods from January 1 through July 30, 2008 and the year ended December 31, 2007 reflect the pre-merger period of
Clear Channel. The consolidated financial statements for all pre-merger periods were prepared using the historical basis of
accounting for Clear Channel. As a result of the merger and the associated purchase accounting, the consolidated financial
statements of the post-merger periods are not comparable to periods preceding the merger.