iHeartMedia 2014 Annual Report Download - page 79

IHEARTCOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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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 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 iHM 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. 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 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 in 2014. The Company recognized a non-cash impairment charge to goodwill of $10.7 million based on
declining future cash flows expected in one country in the International outdoor segment for 2013. The Company had no impairment
of goodwill for 2012.
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.
Other Investments
Other investments are composed primarily of equity securities. These securities are classified as available-for-sale or trading and are
carried at fair value based on quoted market prices. Securities are carried at historical value when quoted market prices are
unavailable. The net unrealized gains or losses on the available-for-sale securities, net of tax, are reported in accumulated other
comprehensive loss as a component of shareholder’s deficit. In addition, the Company holds investments that do not have quoted
market prices. The Company periodically assesses the value of available-for-sale and non-marketable securities and records
impairment charges in the statement of comprehensive loss for any decline in value that is determined to be other-than-temporary.
The average cost method is used to compute the realized gains and losses on sales of equity securities.