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CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
98
accounting is discontinued and the gain or loss that was recorded in other comprehensive income is recognized currently in income.
The swap agreement is valued using a discounted cash flow model that takes into account the present value of the future cash flows
under the terms of the agreements by using market information available as of the reporting date, including prevailing interest rates
and credit spread. Due to the fact that the inputs are either directly or indirectly observable, the Company classified the fair value
measurement of the agreement as Level 2.
The fair value of the Company’s $2.5 billion notional amount interest rate swap designated as a hedging instrument was $76.9 million
and recorded in “Other current liabilities” and $159.1 million and recorded in “Other long-term liabilities” at December 31, 2012 and
2011, respectively. The swap agreement matures on September 30, 2013.
The following table provides the beginning and ending accumulated other comprehensive loss and the current period activity related to
the interest rate swap agreement:
(In thousands)
Accumulated other
comprehensive loss
Balance at December 31, 2010
$
134,067
Other comprehensive income
33,775
Balance at December 31, 2011
100,292
Other comprehensive income
52,112
Balance at December 31, 2012
$
48,180
NOTE 7 – COMMITMENTS AND CONTINGENCIES
The Company accounts for its rentals that include renewal options, annual rent escalation clauses, minimum franchise payments and
maintenance related to displays under the guidance in ASC 840.
The Company considers its non-cancelable contracts that enable it to display advertising on buses, bus shelters, trains, etc. to be leases
in accordance with the guidance in ASC 840-10. These contracts may contain minimum annual franchise payments which generally
escalate each year. The Company accounts for these minimum franchise payments on a straight-line basis. If the rental increases are
not scheduled in the lease, such as an increase based on subsequent changes in the index or rate, those rents are considered contingent
rentals and are recorded as expense when accruable. Other contracts may contain a variable rent component based on revenue. The
Company accounts for these variable components as contingent rentals and records these payments as expense when accruable.
The Company accounts for annual rent escalation clauses included in the lease term on a straight-line basis under the guidance in
ASC 840-20-25. The Company considers renewal periods in determining its lease terms if at inception of the lease there is reasonable
assurance the lease will be renewed. Expenditures for maintenance are charged to operations as incurred, whereas expenditures for
renewal and betterments are capitalized.
The Company leases office space, certain broadcasting facilities, equipment and the majority of the land occupied by its outdoor
advertising structures under long-term operating leases. The Company accounts for these leases in accordance with the policies
described above.
The Company’s contracts with municipal bodies or private companies relating to street furniture, billboards, transit and malls
generally require the Company to build bus stops, kiosks and other public amenities or advertising structures during the term of the
contract. The Company owns these structures and is generally allowed to advertise on them for the remaining term of the contract.
Once the Company has built the structure, the cost is capitalized and expensed over the shorter of the economic life of the asset or the
remaining life of the contract.
In addition, the Company has commitments relating to required purchases of property, plant and equipment under certain street
furniture contracts. Certain of the Company’s contracts contain penalties for not fulfilling its commitments related to its obligations to
build bus stops, kiosks and other public amenities or advertising structures. Historically, any such penalties have not materially
impacted the Company’s financial position or results of operations.
Certain acquisition agreements include deferred consideration payments based on performance requirements by the seller typically