Sprint - Nextel 2012 Annual Report Download - page 175

Table of Contents
CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
In addition, in the event of an issuance of new equity securities or securities exchangeable or convertible into capital stock, which we refer to as
New Securities, certain existing equityholders are entitled to pre
- emptive rights which allow them to purchase their pro - rata share of the New Securities
at the issuance price less any underwriting discounts. This right is considered a derivative that is required to be recorded at fair value. See Note 11,
Derivative Instruments, for further information.
Debt Issuance Costs
— Debt issuance costs are initially capitalized as a deferred cost and amortized to interest expense under the effective
interest method over the expected term of the related debt. Unamortized debt issuance costs related to extinguishment of debt are expensed at the time
the debt is extinguished and recorded in other income (expenses), net in the consolidated statements of operations. Unamortized debt issuance costs
are considered long
- term and recorded in Other assets in the consolidated balance sheets.
Interest Capitalization
— We capitalize interest related to the construction of our network infrastructure assets, as well as the development of
software for internal use. Capitalization of interest commences with pre
- construction period administrative and technical activities, which includes
obtaining leases, zoning approvals and building permits, and ceases when the construction is substantially complete and available for use or when we
suspend substantially all construction activity. Interest is capitalized on construction in progress and software under development. Interest
capitalization is based on rates applicable to borrowings outstanding during the period and the balance of qualified assets under construction during
the period. Capitalized interest is reported as a cost of the network assets or software assets and depreciated over the useful lives of those assets. See
Note 5, Property, Plant and Equipment.
Income Taxes
— We record deferred income taxes based on the estimated future tax effects of differences between the financial statement and
tax basis of assets and liabilities using the tax rates expected to be in effect when the temporary differences reverse. Deferred tax assets are also
recorded for net operating loss, capital loss, and tax credit carryforwards. Valuation allowances, if any, are recorded to reduce deferred tax assets to the
amount considered more likely than not to be realized. We also apply a recognition threshold that a tax position is required to meet before being
recognized in the financial statements. Our policy is to recognize any interest related to unrecognized tax benefits in interest expense or interest
income. We recognize penalties as additional income tax expense.
Revenue Recognition
— We primarily earn revenue by providing access to our high - speed wireless networks. Also included in revenue are
sales of CPE and additional add - on services. In our 4G mobile broadband markets, we offer our services through retail channels and through our
wholesale partners. We believe that the geographic diversity of our retail subscriber base minimizes the risk of incurring material losses due to
concentration of credit risk. Sprint, our major wholesale customer, accounts for substantially all of our wholesale revenues to date, and comprise
approximately 36% of total revenues during the year ended December 31, 2012.
Revenue consisted of the following (in thousands):
Revenue from retail subscribers is billed one month in advance and recognized ratably over the service period. Revenues associated with the
sale of CPE and other equipment is recognized when title and risk of loss is transferred. Billed shipping and handling costs are classified as revenue.
Revenue arrangements with multiple deliverables are divided into separate units and, where available, revenue is allocated using vendor
-
specific objective evidence or third - party evidence of the selling prices; otherwise estimated selling prices are utilized. Any revenue attributable to the
delivered elements is recognized currently in revenue and any revenue attributable to the undelivered elements is deferred and will be recognized as
the undelivered elements are expected to be delivered over the remaining term of the agreements.
With the exception of the Universal Service Fee, which we refer to as USF, a regulatory surcharge, taxes and other fees collected from customers
are excluded from revenues. USF is recorded on a gross basis and included in revenues when billed to
F - 53
For the Year Ended December 31,
2012
2011
2010
Retail revenue
$
795,632
$
758,254
$
480,761
Wholesale revenue
468,469
493,661
50,593
Other revenue
593
1,551
3,749
Total revenues
$
1,264,694
$
1,253,466
$
535,103