Sprint - Nextel 2007 Annual Report Download - page 103

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SPRINT NEXTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
under the equity plans that could also have potentially diluted earnings per common share in the future, however,
they were excluded from the calculation of diluted earnings per common share in 2005 as the exercise prices
exceeded the average market price during this period.
Significant New Accounting Pronouncements
New Fair Value Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This statement changes the
definition of fair value, as defined by previous statements, to “the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market participants at the measurement date.”
Additionally, this statement establishes a hierarchy that classifies the inputs used to measure fair value. In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities. This statement allows entities the choice to measure certain financial instruments and other items at
fair value on specified measurement dates and report any unrecognized gains or losses in earnings and serves to
minimize volatility in earnings that occurs when assets and liabilities are measured differently without having to
apply complex hedge accounting provisions. Both SFAS No. 157 and SFAS No. 159 are effective for our
quarterly reporting period ending March 31, 2008, however in February 2008, the FASB issued a FASB Staff
Position to partially delay the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial
liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring
basis, until fiscal years beginning after November 15, 2008.
Based on the FASB Staff Position noted above, the partial adoption of SFAS No. 157 will not have a
material impact on our financial position and results of operations in 2008. We are still assessing the impact that
SFAS No. 157 will have on our nonrecurring measurements for nonfinancial assets and liabilities in 2009. Upon
the partial adoption of SFAS No. 157 in the quarterly period ending March 31, 2008, we expect to have
additional disclosures in the notes to our consolidated financial statements for certain recurring fair value
measurements. We are continuing to evaluate the impact of the FASB Staff Position noted above as it relates to
the disclosure of our nonrecurring fair value measurements, such as our annual impairment review of our
goodwill and FCC licenses, and it will require significant disclosures related to our key assumptions and
variables used in these analyses. We do not plan to elect the fair value option under the provisions of SFAS
No. 159 for eligible financial assets and liabilities held on January 1, 2008; however we will apply the fair value
provisions of that statement for all eligible assets and liabilities subsequently acquired or modified on or after
January 1, 2008.
Other New Accounting Pronouncements
In September 2006, the EITF reached a consensus on Issue No. 06-1, Accounting for Consideration Given
by a Service Provider to a Manufacturer or Reseller of Equipment Necessary for an End-Customer to Receive
Service from the Service Provider. EITF Issue No. 06-1 provides guidance regarding whether the consideration
given by a service provider to a manufacturer or reseller of specialized equipment should be characterized as a
reduction of revenue or as an expense. This issue is effective for our quarterly reporting period ending March 31,
2008. Entities are required to recognize the effects of applying this issue as a change in accounting principle
through retrospective application to all prior periods unless it is impracticable to do so. We do not expect this
consensus to have a material impact on our consolidated financial statements.
In June 2007, the EITF reached a consensus on Issue No. 06-11, Accounting for Income Tax Benefits of
Dividends on Share-Based Payment Awards. EITF Issue No. 06-11 provides guidance regarding how an entity
should recognize the tax benefit received as a result of dividends paid to holders of share-based compensation
F-18