iHeartMedia 2011 Annual Report Download - page 60

Foreign Currency Exchange Rate Risk
We have operations in countries throughout the world. Foreign operations are measured in their local currencies. As a
result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic
conditions in the foreign markets in which we have operations. We believe we mitigate a small portion of our exposure to foreign
currency fluctuations with a natural hedge through borrowings in currencies other than the U.S. dollar. Our foreign operations
reported net income of approximately $59.5 million for the year ended December 31, 2011. We estimate a 10% increase in the value
of the U.S. dollar relative to foreign currencies would have increased our net loss for the year ended December 31, 2011 by
approximately $5.9 million and that a 10% decrease in the value of the U.S. dollar relative to foreign currencies would have decreased
our net loss by a corresponding amount.
This analysis does not consider the implications that such currency fluctuations could have on the overall economic activity
that could exist in such an environment in the United States or the foreign countries or on the results of operations of these foreign
entities.
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.
NEW ACCOUNTING PRONOUNCEMENTS
In April 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure
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equirements in U.S. GAAP and IFRSs. The amendments in this ASU change the wording used to describe many of the requirements
in U.S. generally accepted accounting principles (“GAAP”) for measuring fair value and for disclosing information about fair value
measurements. For many of the requirements, the FASB does not intend for the amendments in this ASU to result in a change in the
application of the requirements in Topic 820. Some of the amendments clarify the FASB’s intent about the application of existing fair
value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for
disclosing information about fair value measurements. The amendments in this ASU are to be applied prospectively for interim and
annual periods beginning after December 15, 2011. We do not expect the provisions of ASU 2011-04 to have a material effect on our
financial position or results of operations.
In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive
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ncome. This ASU improves the comparability, consistency, and transparency of financial reporting and increases the prominence of
items reported in other comprehensive income by eliminating the option to present components of other comprehensive income as
part of the statement of changes in stockholders’ equity. The amendments require that all nonowner changes in stockholders’ equity
be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The
changes apply for interim and annual financial statements and should be applied retrospectively, effective for fiscal years, and interim
periods within those years, beginning after December 15, 2011. Early adoption is permitted. We currently comply with the provisions
of this ASU by presenting the components of comprehensive income in a single continuous financial statement within our
consolidated statement of operations for both interim and annual periods.
In September 2011, the FASB issued ASU No. 2011-08, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill
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or Impairment. Under the revised guidance, entities testing goodwill for impairment have the option of performing a qualitative
assessment before calculating the fair value of the reporting unit (i.e., step 1 of the goodwill impairment test). If entities determine, on
the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, the two-
step impairment test would be required. The ASU does not change how goodwill is calculated or assigned to reporting units, nor does
it revise the requirement to test goodwill annually for impairment. The amendments are effective for annual and interim goodwill
impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. We early adopted the
provisions of this ASU as of October 1, 2011 with no material impact to our financial position or results of operations. Please refer to
Note 2 included in Item 8 of Part II of this Annual Report on Form 10-K for a further discussion of our impairment testing.
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