Sprint - Nextel 2010 Annual Report Download - page 66

Device and Accessory Inventory
Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method.
Costs of devices and related revenues generated from device sales (equipment net subsidy) are recognized at the time of sale.
Expected equipment net subsidy is not recognized prior to the time of sale because the promotional discount decision is
generally made at the point of sale and because the equipment net subsidies are expected to be recovered through service
revenues.
The net realizable value of devices and other inventory is analyzed on a regular basis. This analysis includes
assessing obsolescence, sales forecasts, product life cycle, marketplace and other considerations. If assessments regarding the
above factors adversely change, we may be required to sell devices at a higher subsidy or potentially record expense in future
periods prior to the point of sale.
Property, Plant and Equipment
Property, plant and equipment (PP&E), including improvements that extend useful lives, are recognized at cost.
Depreciation on property, plant and equipment is generally calculated using the straight-line method based on estimated
economic useful lives of 3 to 30 years for buildings and improvements and network equipment, site costs and related software
and 3 to 12 years for non-network internal use software, office equipment and other. Leasehold improvements are depreciated
over the shorter of the lease term or the estimated useful life of the respective assets. We calculate depreciation on certain
network assets using the group life method. Accordingly, ordinary asset retirements and disposals on those assets are charged
against accumulated depreciation with no gain or loss recognized. Gains or losses associated with all other asset retirements or
disposals are recognized in the consolidated statements of operations. Depreciation rates for assets using the group life method
are revised periodically as required under this depreciation method. Repair and maintenance costs and research and
development costs are expensed as incurred.
We capitalize costs for network and non-network software developed or obtained for internal use during the
application development stage. These costs are included in PP&E and, when the software is placed in service, are depreciated
over estimated useful lives of 3 to 5 years. Costs incurred during the preliminary project and post-implementation stage, as well
as maintenance and training costs, are expensed as incurred.
Investments
Short-term investments are recognized at amortized cost and classified as current assets on the consolidated balance
sheets when the original maturities at purchase are greater than three months but less than one year. Certain investments are
accounted for using the equity method based on the Company's ownership interest and ability to exercise significant influence.
Accordingly, the initial investment is recognized at cost and subsequently adjusted to recognize the Company's share of
earnings or losses of the investee in each reporting period subsequent to the investment date.
Equity method investments are evaluated for other-than-temporary impairment on a regular basis. Other-than-
temporary impairment occurs when the estimated fair value of an investment is below the carrying value, and the difference is
determined to not be recoverable. This evaluation requires significant judgment regarding, among other things, the severity and
duration of the decline in value; the ability and intent to hold the securities until recovery; financial condition, liquidity, and
near-term prospects of the issuer, specific events, and other factors.
Long-Lived Asset Impairment
Sprint evaluates long-lived assets, including intangible assets subject to amortization, for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Asset groups
are determined at the lowest level for which identifiable cash flows are largely independent of cash flows of other groups of
assets and liabilities. When it is probable that undiscounted future cash flows will not be sufficient to recover an asset group's
carrying amount, an impairment is determined by the excess of the asset group's net carrying value over the estimated fair
value. Refer to note 8 for additional information on asset impairments.
Table of Contents SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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