iHeartMedia 2009 Annual Report Download - page 93

The Company impaired definite-lived intangible assets related to certain street furniture and billboard contract intangible assets in its
Americas outdoor and International outdoor segments by $38.8 million as of June 30, 2009. During the fourth quarter of 2009, the
Company recorded a $16.5 million impairment related to billboard contract intangible assets in its International segment.
The Company’s indefinite-lived intangibles include broadcast FCC licenses in its radio broadcasting segment and billboard permits in
its Americas outdoor advertising segment. The excess cost over fair value of net assets acquired is classified as goodwill. The
Company’s indefinite-lived intangibles and goodwill are not subject to amortization, but are tested for impairment at least annually.
The Company tests for possible impairment of definite-lived intangible assets whenever events or changes in circumstances, such as a
reduction in operating cash flow or a dramatic change in the manner for which the asset is intended to be used indicate that the
carrying amount of the asset may not be recoverable. If indicators exist, the Company compares the undiscounted cash flows related
to the asset to the carrying value of the asset. If the carrying value is greater than the undiscounted cash flow amount, an impairment
charge is recorded in amortization expense in the statement of operations for amounts necessary to reduce the carrying value of the
asset to fair value.
The Company performs its annual impairment test for its FCC licenses and permits using a direct valuation technique as prescribed in
ASC 805-20-S99. The key assumptions used in the direct valuation method include market revenue growth rates, market share, profit
margin, duration and profile of the build-up period, estimated start-up cost and losses incurred during the build-up period, the risk
adjusted discount rate and terminal values. The Company engages Mesirow Financial Consulting LLC (“Mesirow Financial”), a third
party valuation firm, to assist the Company in the development of these assumptions and the Company’s determination of the fair
value of its FCC licenses and permits.
The Company performed an interim impairment test as of December 31, 2008 and June 30, 2009, which resulted in non-cash
impairment charges of $1.7 billion and $935.6 million, respectively, on its indefinite-lived FCC licenses and permits. See Note D for
further discussion.
At least annually, the Company performs its impairment test for each reporting unit’s goodwill using a discounted cash flow model to
determine if the carrying value of the reporting unit, including goodwill, is less than the fair value of the reporting unit. The Company
identified its reporting units in accordance with ASC 350-20-55. The U.S. radio markets are aggregated into a single reporting unit
and the U.S. outdoor advertising markets are aggregated into a single reporting unit for purposes of the goodwill impairment test. The
Company also determined that within its Americas outdoor segment, Canada, Mexico, Peru, and Brazil constitute separate reporting
units and each country in its International outdoor segment constitutes a separate reporting unit.
Each of the Company’s reporting units is valued using a discounted cash flow model which requires estimating future cash flows
expected to be generated from the reporting unit, discounted to their present value using a risk-adjusted discount rate. Terminal values
were also estimated and discounted to their present value. Assessing the recoverability of goodwill requires the Company to make
estimates and assumptions about sales, operating margins, growth rates and discount rates based on its budgets, business plans,
economic projections, anticipated future cash flows and marketplace data. There are inherent uncertainties related to these factors and
management’s judgment in applying these factors. The Company engages Mesirow Financial to assist the Company in the
development of these assumptions and the Company’s determination of the fair value of its reporting units.
The Company performed an interim impairment test as of December 31, 2008 and June 30, 2009, and recognized non-cash
impairment charges of $3.6 billion and $3.1 billion, respectively, to reduce its goodwill. See Note D for further discussion.
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