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CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
I
nterim Impairment Test to Goodwill
The discounted cash flow model indicated that the Company failed the first step of the impairment test for certain of its reporting
units as of June 30, 2009, which required it to compare the implied fair value of each reporting unit’s goodwill with its carrying value.
As of June 30, 2009, the Company calculated the weighted average cost of capital (“WACC”) of 11%, 12.5% and 13.5% for each of
the reporting units in the CCME, Americas outdoor and International outdoor segments, respectively. The Company also utilized the
market approach to provide a test of reasonableness to the results of the discounted cash flow model. The market approach can be
estimated through the quoted market price method, the market comparable method, and the market transaction method. The three
variations of the market approach indicated that the fair value determined by the Company’s discounted cash flow model was within a
reasonable range of outcomes.
The Company forecasted revenue, expenses, and cash flows over a ten-year period for each of its reporting units. The revenue
forecasts for 2009 declined 8%, 7% and 9% for CCME, Americas outdoor and International outdoor, respectively, compared to the
forecasts used in the 2008 impairment test primarily as a result of the revenues realized during the first six months of 2009. These
market driven changes were primarily responsible for the decline in fair value of the reporting units below their carrying value. As a
result, the Company recognized a non-cash impairment charge to reduce its goodwill of $3.1 billion at June 30, 2009.
NOTE 3 – INVESTMENTS
The Company’s most significant investments in nonconsolidated affiliates are listed below:
Australian Radio Network
The Company owns a fifty-percent (50%) interest in Australian Radio Network (“ARN”), an Australian company that owns and
operates radio stations in Australia and New Zealand.
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