iHeartMedia 2012 Annual Report Download - page 79

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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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
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.
Other intangible assets include definite-lived intangible assets and permanent easements. The Company’s 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. Permanent
easements are indefinite-lived intangible assets which include certain rights to use real property not owned by the Company.
The Company tests for possible impairment of other intangible assets whenever events and circumstances indicate that they 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.
Goodwill
At least annually, the Company performs its impairment test for each reporting unit’s goodwill. In 2012, the Company used 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 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
constitutes a separate reporting unit and each country in its International outdoor segment constitutes a separate reporting unit. The
Company had no impairment of goodwill for 2012.
In 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. If, after the qualitative
approach, further testing is required, the Company used a discounted cash flow model to determine if the carrying value of the
reporting unit, including goodwill, was 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 segment for 2011. 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.
Nonconsolidated Affiliates
In general, investments in which the Company owns 20 percent to 50 percent of the common stock or otherwise exercises significant
influence over the investee are accounted for under the equity method. The Company does not recognize gains or losses upon the
issuance of securities by any of its equity method investees. The Company reviews the value of equity method investments and
records impairment charges in the statement of operations as a component of “Equity in earnings (loss) of nonconsolidated affiliates”
for any decline in value that is determined to be other-than-temporary.
For 2010, the Company recorded non-cash impairment charges of $8.3 million related to certain equity investments in its International
outdoor segment.