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Table of Contents
CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
cash flows which are largely independent of other assets and liabilities, and management believes that utilizing these assets as a group represents the
highest and best use of the assets and is consistent with management's strategy of utilizing our spectrum licenses on an integrated basis as part of our
nationwide network. For PP&E, there were no impairment losses recorded in the years ended December 31, 2012, 2011 and 2010.
In addition to the analyses described above, we periodically assess certain assets that have not yet been deployed in our networks, including
equipment and cell site development costs, classified as construction in progress. This assessment includes the provision for differences between
recorded amounts and the results of physical counts and the provision for excessive and obsolete equipment. See Note 5, Property, Plant and
Equipment, for further information.
Internally Developed Software
— We capitalize costs related to computer software developed or obtained for internal use, and interest costs
incurred during the period of development. Software obtained for internal use has generally been enterprise - level business and finance software
customized to meet specific operational needs. Costs incurred in the application development phase are capitalized and amortized over the useful life of
the software once the software has been placed in service, which is generally three years. We periodically assess capitalized software costs that have
not been placed in service to determine whether any projects are no longer expected to be completed. The capitalized cost associated with any projects
that are not expected to be completed are written down. Costs recognized in the preliminary project phase and the post
- implementation phase, as well
as maintenance and training costs, are expensed as incurred.
Spectrum Licenses
— Spectrum licenses primarily include owned spectrum licenses with indefinite lives and favorable spectrum leases.
Indefinite lived spectrum licenses acquired are stated at cost and are not amortized. While owned spectrum licenses in the United States are issued for
a fixed time, renewals of these licenses have occurred routinely and at nominal cost. Moreover, we have determined that there are currently no legal,
regulatory, contractual, competitive, economic or other factors that limit the useful lives of our owned spectrum licenses and therefore, the licenses are
accounted for as intangible assets with indefinite lives. The impairment test for intangible assets with indefinite useful lives consists of a comparison
of the fair value of an intangible asset with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss
will be recognized in an amount equal to that excess. The fair value is determined by estimating the discounted future cash flows that are directly
associated with, and that are expected to arise as a direct result of the use and eventual disposition of, the asset. Spectrum licenses with indefinite
useful lives are assessed for impairment annually, or more frequently, if an event indicates that the asset might be impaired. We had no impairments for
any of the periods presented for indefinite lived intangible assets.
Favorable spectrum leases are stated at cost, net of accumulated amortization, and are assessed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying value of spectrum leases are amortized on a straight
-
line basis over their estimated useful lives or lease term, including expected renewal periods, as applicable. There were no impairment losses for
favorable spectrum leases in the years ended December 31, 2012, 2011 and 2010.
Other Intangible Assets
— Other intangible assets consist of subscriber relationships, trademarks, patents and other, and are stated at cost net
of accumulated amortization. Amortization is calculated using either the straight - line method or an accelerated method over the assets' estimated
remaining useful lives. Other intangible assets are assessed for impairment whenever events or changes in circumstances indicate that the carrying
amount of the asset may not be recoverable. There were no impairment losses for our other intangible assets in the years ended December 31, 2012,
2011 and 2010.
Derivative Instruments and Hedging Activities
— It is our policy that hedging activities are executed only to manage exposures arising in the
normal course of business and not for the purpose of creating speculative positions or trading. We record all derivatives on the balance sheet at fair
value as either assets or liabilities. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and
whether it qualifies for hedge accounting.
During 2010, we issued exchangeable notes that included embedded exchange options, which we refer to as the Exchange Options, which
qualified as derivative instruments and are required to be accounted for separately from the host debt instruments and recorded as derivative financial
instruments at fair value. The embedded Exchange Options do not qualify for hedge accounting, and as such, all future changes in the fair value of
these derivative instruments will be recognized currently in earnings until such time as the Exchange Options are exercised or expire. See Note 11,
Derivative Instruments, for further information.
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