Sprint - Nextel 2011 Annual Report Download - page 77

Table of Contents
SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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-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.
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 retaining and attracting 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 2011, 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 Federal Communications Commission (FCC) licenses and other intangible assets.
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inite-Lived Intangible Assets
Our indefinite-lived intangible assets primarily consists of goodwill, FCC licenses acquired primarily through FCC auctions and business combinations to
deploy our wireless services, and certain of our trademarks. Goodwill represents the excess of consideration paid over the estimated fair value of the net tangible and
identifiable intangible assets acquired in business combinations. 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.
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it 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, 2011 and 2010, the fair value of our pension plan assets and certain other postretirement benefits in aggregate was $1.4 billion and $1.3
billion, respectively, and the fair value of our projected benefit obligations in aggregate was $2.2 billion and $1.9 billion, respectively. As a result, the plans were
underfunded by approximately $800 million and $600 million at December 31, 2011 and 2010, respectively, and were recorded as a net liability in our consolidated
balance sheets. Estimated contributions totaling approximately $125 million are expected to be paid during 2012.
The offset to the pension liability is recorded in equity as a component of "Accumulated other comprehensive loss," net of tax, including the 2011 and 2010 net
actuarial loss of $349 million and $171 million, respectively. The change in the net liability of the plan in 2011 was affected primarily by a decrease in the discount rate,
from 6.0% to 5.4%, used to estimate the projected benefit obligation. We intend to make future cash
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