Sprint - Nextel 2012 Annual Report Download - page 64

Table of Contents
time, we would likely consider the decline to be indicative of a decline in the estimated fair value at the reporting unit level.
Differences in the Company's actual future cash flows, operating results, growth rates, capital expenditures, cost of capital and discount
rates as compared to the estimates utilized for the purpose of estimating the fair value of each reporting unit, as well as a decline in the Company's
stock price and related market capitalization, could affect the results of our annual goodwill assessment and, accordingly, potentially lead to a future
goodwill impairment.
The determination of the estimated fair value of the wireless reporting unit requires significant estimates and assumptions. These estimates
and assumptions primarily include, but are not limited to, transactions within the wireless industry and related control premiums, discount rate, terminal
growth rates, operating income before depreciation and amortization (OIBDA) and capital expenditures forecasts. Due to the inherent uncertainty
involved in making those estimates, actual results could differ from those estimates. The merits of each significant assumption, both individually and
in the aggregate, used to estimate the fair value of a reporting unit are evaluated for reasonableness. A decline in the estimated fair value of our
wireless reporting unit of 10% would not result in an impairment of our goodwill.
Our FCC licenses and our Sprint and Boost Mobile trademarks have been identified as indefinite
- lived intangible assets, in addition to
goodwill, after considering 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. At least annually, Sprint assesses the recoverability of other indefinite
- lived intangibles, including FCC licenses which
are carried as a single unit of accounting. In assessing recoverability of FCC licenses, we estimate the fair value of such licenses using the Greenfield
direct value method, which approximates value through estimating the discounted future cash flows of a hypothetical start
- up business. Assumptions
key in estimating fair value under this method include, but are not limited to, capital expenditures, subscriber activations and deactivations, market
share achieved, tax rates in effect and discount rate. A one percent decline in our assumed revenue growth rate used to estimate terminal value, a one
percent decline in our assumed net cash flows or a one percent adverse change in any of the key assumptions referred to above would not result in an
impairment of our FCC licenses as of the most recent testing date. A decline in the estimated fair value of FCC licenses of approximately 10% also
would not result in an impairment of the carrying value.
NEW ACCOUNTING PRONOUNCEMENTS
In May 2011, the Financial Accounting Standards Board (FASB) issued authoritative guidance regarding Fair Value Measurement:
Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, which resulted in common
requirements for measuring fair value and for disclosing information about fair value measurement under both U.S. GAAP and International Financial
Reporting Standards (IFRS), including a consistent definition of the term "fair value." The amendments were effective beginning in the first quarter
2012, and did not have a material effect on our consolidated financial statements.
In December 2011, the FASB issued authoritative guidance regarding Disclosures about Offsetting Assets and Liabilities, which requires
common disclosure requirements to allow investors to better compare and assess the effect of offsetting arrangements on financial statements
prepared under U.S. GAAP with financial statements prepared under IFRS. The standard will be effective beginning in the first quarter of 2013, requires
retrospective application, and will only affect disclosures in the footnotes to the financial statements. In October 2012, the FASB tentatively decided to
limit the scope of this authoritative guidance to derivatives, repurchase agreements, and securities lending and securities borrowing arrangements. In
January 2013, the FASB issued additional clarifying guidance which limited the scope of the disclosure requirements to derivatives, repurchase
agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with
specific criteria contained in U.S. GAAP or subject to a master netting arrangement or similar agreement. Based on the proposed scope revision, we do
not expect this authoritative guidance to impact our existing disclosures.
In July 2012, the FASB issued authoritative guidance regarding Testing Indefinite
- Lived Intangible Assets for Impairment, which is
intended to reduce the cost and complexity of the annual impairment test for indefinite - lived intangible assets by providing entities with the option of
performing an elective qualitative assessment to determine whether further impairment testing is necessary. The standard will be effective for annual
and interim indefinite
- lived intangible asset impairment tests performed beginning the first quarter of 2013, with early adoption
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