Sprint - Nextel 2010 Annual Report Download - page 67

Certain assets that have not yet been deployed in the business, including network equipment, cell site development
costs and software in development, are periodically assessed to determine recoverability. Network equipment and cell site
development costs are expensed whenever events or changes in circumstances cause the Company to conclude the assets are no
longer needed to meet management's strategic network plans and will not be deployed. Software development costs are
expensed when it is no longer probable that the software project will be deployed. Network equipment that has been removed
from the network is also periodically assessed to determine recoverability. If we continue to have operational challenges,
including obtaining and retaining subscribers, future cash flows of the Company may not be sufficient to recover the carrying
value of our wireless asset group, and we could record asset impairments that are material to Sprint's consolidated results of
operations and financial condition.
During 2010, we assessed the recoverability of the wireless asset group, which includes tangible and intangible long-
lived assets subject to amortization as well as indefinite-lived intangible assets. We included cash flow projections from
wireless operations along with cash flows associated with the eventual disposition of the long-lived assets, which included
estimated proceeds from the assumed sale of FCC licenses, trademarks and customer relationships. The estimated undiscounted
future cash flows of the wireless long-lived assets exceeded their carrying amount and, as a result, no impairment charge was
recorded. In addition, we re-assessed the remaining useful lives of these long-lived assets and concluded they were appropriate.
Indefinite-Lived Intangible Assets
Goodwill represents the excess of consideration paid over the estimated fair value of the net tangible and identifiable
intangible assets acquired in business combinations. Our indefinite-lived intangible assets include Federal Communications
Commission (FCC) licenses, acquired primarily through FCC auctions and business combinations, to deploy our wireless
services, and certain of our trademarks. In determining whether an intangible asset, other than goodwill, is indefinite-lived, we
consider the expected use of the assets, the regulatory and economic environment within which they are being used, and the
effects of obsolescence on their use. We assess our indefinite-lived intangible assets for impairment at least annually or, if
necessary, more frequently, whenever events or changes in circumstances indicate the asset may be impaired. Such indicators
may include a sustained, significant decline in our market capitalization since our previous impairment assessment, a
significant decline in our expected future cash flows, a significant adverse change in legal factors or in the business climate,
unanticipated competition, and/or slower growth rates, among others.
Benefit Plans
We provide a defined benefit pension plan and certain other postretirement benefits to certain employees, and we
sponsor a defined contribution plan for all employees. As of December 31, 2005, the pension plan was amended to freeze
benefit plan accruals for participants. The objective for the investment portfolio of the pension plan is to achieve a long-term
nominal rate of return, net of fees, which exceeds the plan's long-term expected rate of return on investments for funding
purposes which was 8.5% for 2010. To meet this objective, our investment strategy is governed by an asset allocation policy,
whereby a targeted allocation percentage is assigned to each asset class as follows: 50% to U.S. equities; 15% to international
equities; 15% to fixed income investments; 10% to real estate investments; and 10% to other investments including hedge
funds. Actual allocations are allowed to deviate from target allocation percentages by plus or minus 5%.
Investments of the pension plan are measured at fair value on a recurring basis which is determined using quoted
market prices or estimated fair values. As of December 31, 2010, 60% of the investment portfolio was valued at quoted prices
in active markets for identical assets; 25% was valued using quoted prices for similar assets in active or inactive markets, or
other observable inputs; and 15% was valued using unobservable inputs that are supported by little or no market activity. As of
December 31, 2010 and 2009, the fair value of our plan assets in aggregate was $1.3 billion and $1.2 billion, respectively, and
the fair value of our projected benefit obligations in aggregate was $1.9 billion and $1.6 billion, respectively. As a result, the
plans were underfunded by approximately $600 million and $400 million at December 31, 2010 and 2009, respectively, and
were recorded as a net liability in our consolidated balance sheets. Estimated contributions totaling approximately $150 million
are expected to be paid during 2011.
Table of Contents SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
F-10