Sprint - Nextel 2012 Annual Report Download - page 139

Table of Contents
SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cash and cash equivalents, accounts and notes receivable, and accounts payable are carried at cost, which approximates fair value. Our
short
- term investments (consisting primarily of time deposits, commercial paper, and Treasury securities), totaling $1.8 billion and $150 million as of
December 31, 2012 and 2011 , respectively, are recorded at amortized cost, and the respective carrying amounts approximate fair value. The fair value of
our marketable equity securities, totaling $45 million and $43 million as of December 31, 2012 and 2011 , respectively, is measured on a recurring basis
using quoted prices in active markets.
The estimated fair value of current and long
- term debt, excluding the convertible bond, is determined based on quoted prices in active
markets or by using other observable inputs that are derived principally from or corroborated by observable market data. To estimate the fair value of
our convertible bond, we used a convertible bond pricing model based on the relevant interest rates, conversion feature and other significant inputs
not observable in the market. The significant unobservable inputs used in the fair value measurement of the Company's convertible bond are the credit
condition of the Company, probability and timing of conversion, and discount for lack of marketability. Significant increases or decreases in any of
those inputs in isolation would result in a significantly lower or higher fair value measurement of the bond. During 2012, we had
$2.0 billion of long -
term senior notes that were transferred out of estimated fair value using observable inputs and into estimated fair value using quoted prices in active
markets as a result of publicly registering our private placement senior note offerings.
The following table presents carrying amounts and estimated fair values of our current and long
- term debt:
Property, plant and equipment consists primarily of network equipment and other long
- lived assets used to provide service to our
subscribers. In the first quarter 2012, we formalized our plans to take off
- air roughly one - third, or 9,600 cell sites, of our total Nextel platform by the
middle of 2012 with the remaining sites to be taken off
- air by June 30, 2013. As a result, in the first quarter 2012, we revised our estimates to shorten the
expected useful lives of Nextel platform assets through 2013, the expected benefit period of the underlying assets, and also revised the expected timing
and amount of our asset retirement obligations. During the second quarter 2012, as a result of our progress in taking Nextel platform sites off
- air and
our progress toward notifying and transitioning customers off the Nextel platform, we further reduced our estimated benefit period for the remaining
Nextel platform assets through the middle of 2013 resulting in incremental depreciation expense during the period. The amounts reflected as
depreciation expense are dependent upon the expected useful lives of assets, which includes our expectation of the timing of assets to be phased out
of service, and could result in further revision during the decommissioning period. In addition, increasing data usage driven by more subscribers on
the Sprint platform and a continuing shift in our subscriber base to smartphones is expected to require additional legacy 3G Sprint platform equipment
that will not be utilized beyond the final deployment of Network Vision's multi
- mode technology, which began in 2011 and is expected to continue
through the middle of 2014. As a result, the estimated useful lives of such equipment will be shortened, as compared to similar prior capital
expenditures, through the date on which Network Vision equipment is deployed and in - service. The incremental effect of accelerated depreciation
expense totaled approximately
$2.1 billion for the year ended December 31, 2012 , of which the majority related to shortened useful lives of Nextel
platform assets.
In connection with Network Vision, a substantial portion of the value of certain spectrum licenses that were not previously placed in
service are now ready for their intended use. As qualifying activities are performed related to Network Vision, interest expense primarily related to the
carrying value of these spectrum licenses is being
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Note 5.
Financial Instruments
Estimated Fair Value Using Input Type
Carrying Amount
Quoted prices in active
markets
Observable
Unobservable
Total estimated fair value
(in millions)
December 31, 2012
$
23,570
$
17,506
$
6,118
$
3,104
$
26,728
December 31, 2011
$
19,505
$
12,567
$
5,023
$
—
$
17,590
Note 6.
Property, Plant and Equipment