Sprint - Nextel 2008 Annual Report Download - page 122

CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Share-Based Compensation — The estimate of share-based compensation expense requires complex and
subjective assumptions, including the stock price volatility, employee exercise patterns (expected life of the
options), future forfeitures, and related tax effects. Share-based compensation expense on new awards and for
awards modified, repurchased, or cancelled is based on the estimated grant-date fair value, using the Black-
Scholes option pricing model, and is recognized, net of a forfeiture rate on those shares expected to vest over a
graded vesting schedule on a straight-line basis over the requisite service period for each separately vesting
portion of the award as if the award was, in substance, multiple awards.
Operating Leases — We have operating leases for spectrum licenses, towers and certain facilities, and
equipment for use in our operations. Certain of our spectrum licenses are leased from third-party holders of
Educational Broadband Service, which we refer to as EBS, spectrum licenses granted by the FCC. EBS licenses
authorize the provision of certain communications services on the EBS channels in certain markets throughout
the United States. We account for these spectrum leases as executory contracts which are similar to operating
leases. Signed leases which have unmet conditions required to become effective are not amortized until such
conditions are met and are included in spectrum licenses in the accompanying consolidated balance sheets, if
such leases require upfront payments. For leases containing scheduled rent escalation clauses, we record
minimum rental payments on a straight-line basis over the term of the lease, including the expected renewal
periods as appropriate. For leases containing tenant improvement allowances and rent incentives, we record
deferred rent, which is a liability, and that deferred rent is amortized over the term of the lease, including the
expected renewal periods as appropriate, as a reduction to rent expense.
Foreign Currency — Our international subsidiaries generally use their local currency as their functional
currency. Assets and liabilities are translated at exchange rates in effect at the balance sheet date. Resulting
translation adjustments are recorded within accumulated other comprehensive income (loss). Income and
expense accounts are translated at the average monthly exchange rates. The effects of changes in exchange rates
between the designated functional currency and the currency in which a transaction is denominated are recorded
as foreign currency transaction gains (losses) and recorded in the consolidated statement of operations.
Concentration of Risk — We believe that the geographic diversity of our customer base and retail nature of
our product minimizes the risk of incurring material losses due to concentrations of credit risk.
Recent Accounting Pronouncements
In June and December 2009, the Financial Accounting Standards Board, which we refer to as the FASB,
issued new accounting guidance that amends the consolidation guidance applicable to variable interest entities.
The amendments will affect the overall consolidation analysis under the current accounting guidance. The new
accounting guidance is effective for fiscal years and interim periods beginning after November 15, 2009. We are
currently evaluating the impact of the new guidance on our financial condition and results of operations.
In August 2009, the FASB issued new accounting guidance for the fair value measurement of liabilities
when a quoted price in an active market is not available. We adopted the new accounting guidance on October 1,
2009. The adoption did not have any impact on our financial condition or results of operations.
In October 2009, the FASB issued new accounting guidance that amends the revenue recognition for
multiple-element arrangements and expands the disclosure requirements related to such arrangements. The new
guidance amends the criteria for separating consideration in multiple-deliverable arrangements, establishes a
selling price hierarchy for determining the selling price of a deliverable, eliminates the residual method of
allocation, and requires the application of relative selling price method in allocating the arrangement
consideration to all deliverables. The new accounting guidance is effective for fiscal years beginning after
June 15, 2010. We are currently evaluating the impact of the new guidance on our financial condition and results
of operations.
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