iHeartMedia 2011 Annual Report Download - page 73

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Land Leases and Other Structure Licenses
Most of the Company’s outdoor advertising structures are located on leased land. Americas outdoor land leases are typically paid in
advance for periods ranging from one to 12 months. International outdoor land leases are paid both in advance and in arrears, for
periods ranging from one to 12 months. Most International street furniture display faces are operated through contracts with
municipalities for up to 20 years. The leased land and 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.
Intangible Assets and Goodwill
Definite-lived intangible assets include primarily transit and street furniture contracts, talent and representation contracts, customer
and advertiser relationships, and site-leases, all of which are amortized over the respective lives of the agreements, or over the period
of time the assets are expected to contribute directly or indirectly to the Company’s future cash flows. The Company periodically
reviews the appropriateness of the amortization periods related to its definite-lived intangible assets. These assets are recorded at cost.
The Company tests for possible impairment of definite-lived intangible assets whenever events and circumstances indicate that
amortizable long-lived assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less
than the carrying amounts 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.
The Company impaired certain definite-lived intangible assets primarily related to a talent contract in its CCME segment by $3.9
million during 2010. 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 $55.3 million during 2009.
The Company’s indefinite-lived intangible assets include FCC broadcast licenses in its CCME segment and billboard permits in its
Americas outdoor advertising segment. The Company’s indefinite-lived intangible assets are not subject to amortization, but are
tested for impairment at least annually. The Company tests for possible impairment of indefinite-lived intangible assets whenever
events or changes in circumstances, such as a significant 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.
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 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 its annual impairment test on its indefinite-lived intangible assets as of October 1, 2011, which resulted in a
non-cash impairment charge of $6.5 million related to permits in one specific market. The Company performed impairment tests
during 2010 and 2009, which resulted in non-cash impairment charges of $5.3 million and $935.6 million, respectively, related to its
indefinite-lived FCC licenses and permits. See Note 2 for further discussion.
At least annually, the Company performs its impairment test for each reporting unit’s goodwill. Beginning with its annual impairment
testing in the fourth quarter of 2011, the Company utilized the option to assess qualitative factors under ASC 350-20-35 to determine
whether it was more likely than not that the fair value of its reporting units was less than their carrying amounts, including goodwill.
The Company has 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 Company’s 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.
If, after the qualitative approach, further testing is required, the Company uses 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 recognized a
non-cash impairment charge of $1.1 million to reduce goodwill in one country within its International outdoor segments for 2011,
which is further discussed in Note 2.
The Company performed its annual goodwill impairment test during 2010, and recognized a non-cash impairment charge of $2.1
million related to a specific reporting unit in its International outdoor segment. See Note 2 for further discussion. The Company
performed its impairment tests during 2009 and recognized non-cash impairment charges of $3.1 billion. See Note 2 for further
discussion.
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