Sprint - Nextel 2012 Annual Report Download - page 131

Table of Contents
SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
2012 , 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.
Indefinite
- Lived Intangible Assets
Our indefinite
- lived intangible assets primarily consist 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.
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, 2012 and 2011 , the fair value of our pension plan assets and certain other postretirement benefits in aggregate was $1.6
billion and $1.4 billion , respectively, and the fair value of our projected benefit obligations in aggregate was $2.7 billion and $2.2 billion , respectively.
As a result, the plans were underfunded by approximately
$1.1 billion and $800 million at December 31, 2012 and 2011 , respectively, and were recorded
as a net liability in our consolidated balance sheets. Estimated contributions totaling approximately $3 million are expected to be paid during 2013.
The offset to the pension liability is recorded in equity as a component of "Accumulated other comprehensive loss," net of tax, including
the 2012 and 2011 net actuarial loss of $404 million and $349 million , respectively, which is amortized to "Selling, general and administrative" in Sprint's
consolidated statement of comprehensive loss. The change in the net liability of the plan in
2012 was affected primarily by a decrease in the discount
rate, from 5.4% to 4.3% , used to estimate the projected benefit obligation. We intend to make future cash contributions to the pension plan in an
amount necessary to meet minimum funding requirements according to applicable benefit plan regulations.
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
8.0% for 2012 . To meet this objective, our investment strategy for 2012 was 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
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