Sprint - Nextel 2008 Annual Report Download - page 79

SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
expense. We compensate our dealers using specific compensation programs related to the sale of our devices and
our subscriber service contracts, or both. When a commission is earned by a dealer solely due to a selling activity
relating to wireless service, the cost is recorded as a selling expense. When a commission is earned by a dealer
due to the dealer selling one of our devices, the cost is recorded as a reduction to equipment revenue.
Advertising Costs
We recognize advertising expense when incurred as selling, general and administrative expense.
Advertising expenses totaled $1.5 billion, $1.5 billion and $1.8 billion for the years ended December 31, 2009,
2008 and 2007, respectively.
New Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 168, The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles, which establishes the FASB Accounting Standards Codification
(Codification) as the only source of authoritative GAAP in the United States, except that rules and interpretive
releases issued by the Securities and Exchange Commission (SEC) also are sources of authoritative GAAP for
SEC registrants. Subsequent to the issuance of SFAS No. 168, the FASB will no longer issue Statements, Staff
Positions, or Emerging Issues Task Force Abstracts, but will issue Accounting Standards Updates (ASU) which
will amend the Codification. As a result, the Codification supersedes authoritative literature effective prior to
June 2009.
The FASB issued authoritative literature regarding accounting for Business Combinations,
Non-controlling Interests in Consolidated Financial Statements and Disclosures about Derivative Instruments
and Hedging Activities which were effective for the quarter ended March 31, 2009. The Business Combinations
guidance was adopted on January 1, 2009. As a result of adoption, for our fourth quarter acquisitions (see Note
3), we recognized a gain of $151 million ($92 million after tax) related to the increase to estimated fair value of
our non-controlling interest in VMU. In addition, under the new guidance, transaction costs and costs associated
with exit activities are expensed as incurred. The remaining guidance did not have a material effect on our
consolidated financial statements.
In June 2008, the FASB issued authoritative literature regarding Determining Whether Instruments
Granted in Share-Based Payment Transactions are Participating Securities, which was effective beginning
January 1, 2009.Based on this pronouncement, our outstanding non-vested restricted stock units that contain a
non-forfeitable right to receive dividends, whether paid or unpaid, are participating securities and therefore,
should be included in the computation of basic and diluted earnings per share. As required by this
pronouncement, prior period basic and diluted earnings per share and weighted average common shares
outstanding were adjusted. The impact to basic and diluted earnings per share and weighted average common
shares outstanding did not have a material effect on our consolidated financial statements.
In November 2008, the FASB issued authoritative literature regarding Equity Method Investment
Accounting Considerations, to clarify the application of equity method accounting. Among other things, this
literature requires equity method investors to account for equity investee share issuances as if the investor had
sold a proportionate share of its investment, with the recognition of any resulting gain or loss in earnings. The
Company adopted these requirements effective January 1, 2009. As a result, we recognized a pre-tax loss of $154
million ($96 million after tax) related to the dilution of our investment in Clearwire resulting from their first
quarter 2009 share issuance.
In April 2009, the FASB issued authoritative literature regarding (i) Interim Disclosures about Fair
Value of Financial Instruments, to require disclosures about fair value of financial instruments for interim
reporting periods of publicly traded companies (ii) Recognition and Presentation of Other-Than-Temporary
Impairments, which amends the other-than-temporary impairment guidance for debt securities to make the
guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments
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