Sprint - Nextel 2008 Annual Report Download - page 119

CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
We maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair
value measurements. If listed prices or quotes are not available, fair value is based upon internally developed
models that primarily use, as inputs, market-based or independently sourced market parameters, including but not
limited to interest rate yield curves, volatilities, equity or debt prices, and credit curves. We utilize certain
assumptions that market participants would use in pricing the financial instrument, including assumptions about
risk, such as credit, inherent and default risk. The degree of management judgment involved in determining the fair
value of a financial instrument is dependent upon the availability of quoted market prices or observable market
parameters. For financial instruments that trade actively and have quoted market prices or observable market
parameters, there is minimal judgment involved in measuring fair value. When observable market prices and
parameters are not fully available, management judgment is necessary to estimate fair value. In addition, changes in
market conditions may reduce the availability and reliability of quoted prices or observable data. In these instances,
we use certain unobservable inputs that cannot be validated by reference to a readily observable market or exchange
data and rely, to a certain extent, on our own assumptions about the assumptions that a market participant would use
in pricing the security. These internally derived values are compared with non-binding values received from brokers
or other independent sources, as available. See Note 12, Fair Value, for further information.
Accounts Receivable — Accounts receivables are stated at amounts due from customers net of an allowance
for doubtful accounts.
Inventory — Inventory primarily consists of customer premise equipment, which we refer to as CPE, and
other accessories sold to customers and is stated at the lower of cost or net realizable value. Cost is determined
under the average cost method. We record inventory write-downs for obsolete and slow-moving items based on
inventory turnover trends and historical experience.
Property, Plant and Equipment — Property, plant and equipment, which we refer to as PP&E, is stated at
cost, net of accumulated depreciation. Depreciation is calculated on a straight-line basis over the estimated useful
lives of the assets once the assets are placed in service. Our network construction expenditures are recorded as
construction in progress until the network or other asset is placed in service, at which time the asset is transferred
to the appropriate PP&E category. We capitalize costs of additions and improvements, including direct costs of
constructing PP&E and interest costs related to construction. The estimated useful life of equipment is
determined based on historical usage of identical or similar equipment, with consideration given to technological
changes and industry trends that could impact the network architecture and asset utilization. Leasehold
improvements are recorded at cost and amortized over the lesser of their estimated useful lives or the related
lease term, including renewals that are reasonably assured. Maintenance and repairs are expensed as incurred.
PP&E is assessed for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. When such events or circumstances exist, we would determine the
recoverability of the asset’s carrying value by estimating the expected undiscounted future cash flows that are
directly associated with and that are expected to arise as a direct result of the use of the asset. If the expected
undiscounted future cash flows are less than the carrying amount of the asset, a loss is recognized for the
difference. For purposes of recognition and measurement, we group our long-lived assets, including PP&E and
intangible assets with definite useful lives, at the lowest level for which there are identifiable cash flows which
are largely independent of other assets and liabilities, and we test for impairment on an aggregated basis for
assets in the United States consistent with the management of the business on a national scope. There were no
PP&E impairment losses recorded in the years ended December 31, 2009, 2008 and 2007.
In addition to the analyses described above, we periodically assess certain assets that have not yet been
deployed in our network, including equipment and cell site development costs. This assessment includes the
write-off of network equipment for estimated shrinkage experienced during the deployment process and the
write-off of network equipment and cell site development costs whenever events or changes in circumstances
cause us to conclude that such assets are no longer needed to meet management’s strategic network plans and
will not be deployed.
F-53