Sprint - Nextel 2008 Annual Report Download - page 80

SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
on debt and equity securities in the financial statements and (iii) Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are
Not Orderly which provides additional guidance on determining fair value when the volume and level of trading
activity for an asset or liability have significantly decreased when compared with normal market activity. These
pronouncements were effective beginning in the second quarter 2009 and did not have a material effect on our
consolidated financial statements. In addition, the FASB issued further guidance related to Accounting for Assets
Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies, to address
application issues relevant to initial recognition and measurement, subsequent measurement and accounting, and
disclosure of assets and liabilities arising from contingencies in a business combination. This guidance, which
did not have a material effect on our consolidated financial statements, is effective for business combinations on
or after January 1, 2009 and was utilized in the accounting for the acquisitions disclosed in Note 3.
In June 2009, the FASB issued authoritative literature regarding Amendments to FASB Interpretation
No. 46(R), which changes various aspects of accounting for and disclosures of interests in variable interest
entities, and the Accounting for Transfers of Financial Assets, which was issued in order to improve the
relevance, representational faithfulness, and comparability of the information that a reporting entity provides in
its financial statements about a transfer of financial assets; the effects of a transfer on its financial position,
financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial
assets. This guidance will be effective beginning in January 2010 and is not expected to have a material effect on
our consolidated financial statements.
In September 2009, the FASB modified the accounting for Multiple-Deliverable Revenue Arrangements
and Certain Revenue Arrangements that Include Software Elements. These modifications alter the methods
previously required for allocating consideration received in multiple-element arrangements to require revenue
allocation to elements containing software components and non-software components that function together to
deliver the product’s essential functionality. These modifications will be effective prospectively for the fiscal
year ended December 31, 2011 and are currently being evaluated to determine the effect, if any, on our
consolidated financial statements.
In January 2010, the FASB issued authoritative guidance regarding Improving Disclosures about Fair
Value Measurements, which requires new and amended disclosure requirements for classes of assets and
liabilities, inputs and valuation techniques and transfers between levels of fair value measurements and
Accounting for Distributions to Shareholders with Components of Stock and Cash, which clarifies the accounting
for distributions to shareholders that offer them the ability to elect to receive their entire distribution in cash or
shares of equivalent value. This guidance will be effective beginning in January 2010, and is not expected to
have a material effect on our consolidated financial statements.
Concentrations of Risk
Our accounts and notes receivable are not subject to any substantial concentration of credit risk.
Motorola, Inc. is our sole source for most of the equipment that supports the iDEN network and for all
of the devices we offer under the Nextel brand except primarily BlackBerry®devices. Although our handset
supply agreement with Motorola is structured to provide competitively-priced devices, the cost of iDEN devices
is generally higher than devices that do not incorporate a similar multi-function capability. This difference may
make it more difficult or costly for us to offer devices at prices that are attractive to potential subscribers. In
addition, the higher cost of iDEN devices requires us to absorb a larger part of the cost of offering devices to new
and existing subscribers. These increased costs and equipment subsidy expenses may reduce our growth and
profitability. Also, we must rely on Motorola to develop devices and equipment capable of supporting the
features and services we offer to subscribers of services on our iDEN network, including dual-mode devices that
operate on both our iDEN and CDMA networks. A decision by Motorola to discontinue, or the inability of
Motorola to continue,manufacturing, supporting or enhancing our iDEN-based infrastructure and devices would
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