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positions using the straight-line method over the estimated useful life
of seven years, or the lease term, whichever is shorter. We depreciate
buildings using the straight-line method over estimated useful lives of
twenty years. Office and measuring equipment, vehicles and furniture
are depreciated using the straightline method over estimated useful
lives ranging from five to ten years. The actual economic lives may be
different than our estimated useful lives, thereby resulting in different
carrying value of our property and equipment. Changes in technology, our
intended use of property and equipment or issues related to our ability
to operate in an area due to licensing problems may cause the estimated
useful lives or the value of these assets to change. We perform periodic
internal studies to confirm the appropriateness of the estimated useful
economic lives of our property and equipment. These studies could result
in a change in the depreciable lives of our property and equipment and,
therefore, our depreciation expense in future periods.
We account for impairment of long-lived assets, except for goodwill, in
accordance with the provisions of SFAS No. 144, «Accounting for the
Impairment or Disposal of Long-Lived Assets.» SFAS No. 144 requires that
long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the carrying
amount of an asset to future net cash flows expected to be generated by
the asset. If such assets are considered to be impaired, the impairment
to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Impairment
tests require estimates in respect of the grouping of long-lived assets.
We test long-lived assets for impairment when there are indicators of
impairment, such as: significant decrease in the market prices of longlived
assets, significant adverse change in the extent or manner in
which long-lived assets are being used or in their physical condition,
significant adverse change in legal factors or in the business climate
that could affect the value of a long-lived assets, including an adverse
action or assessment by a regulator, etc. The determination of whether
there are impairment indicators requires judgment on our behalf. The
use of different assumptions in our estimated future cash flows when
determining whether the assets are impaired may result in additional
impairment charge.
Goodwill and Intangible Assets
We capitalize payments made to third party suppliers to acquire access to
and for use of telephone lines (telephone line capacity). These payments
are accounted for as intangible assets and are amortized on a straightline
basis over 10 years. Telecommunication licenses are amortized on a
straight-line basis within the estimated useful lives determined based
on the management estimation of future economic benefits from these
licenses. Other intangible assets are amortized on a straight-line basis
over their estimated useful lives, generally from four to ten years. Goodwill
represents the excess of consideration paid over the fair value of net
assets acquired in purchase business combinations. Our other intangible
assets are amortized on a straight-line basis over their estimated useful
lives, generally from four to ten years.
ВымпелКом / Годовой отчет 2007
The actual economic lives of intangible assets may be different than our
estimated useful lives, thereby resulting in a different carrying value of
our intangible assets with finite lives. In accordance with SFAS No. 142,
«Goodwill and Other Intangible Assets,» we continue to evaluate the
amortization period for intangible assets with finite lives to determine
whether events or circumstances warrant revised amortization periods.
These evaluations could result in a change in the amortizable lives of
our intangible assets with finite lives and, therefore, our amortization
expense in future periods. Historically we have had no material changes
in estimated useful lives of our intangible assets.
In accordance with SFAS No. 142, we test goodwill for impairment on an
annual basis. Additionally, goodwill is tested for impairment between
annual tests if an event occurs or circumstances change that would
more likely than not reduce the fair value of an entity below its carrying
value. These events or circumstances would include a significant change
in the business climate, legal factors, operating performance indicators,
competition, sale or disposition of a significant portion of our business
or other factors. Impairment tests require estimates in respect of the
identification of reporting units and their fair value. The determination
of whether there are impairment indicators requires judgment on our
behalf. We use estimated discounted future cash flows to determine the
fair value of reporting units. The use of different estimates or assumptions
within our discounted cash flow models when determining the fair value
of reporting units may result in different value for our goodwill, and any
related impairment charge. Significant assumptions in our valuation of
our reporting units include the timing and amount of future cash flows,
the appropriate discount rate at which to value those estimated cash
flows, and our estimated growth rates during the terminal period.
Allowance for Doubtful Accounts
The allowance estimation process requires management to make
assumptions based on historical results, future expectations, the economic
and competitive environment, and other relevant factors. Allowances for
doubtful accounts receivable are maintained based on historical payment
patterns, aging of accounts receivable and actual collection history. We
maintain allowances for doubtful accounts for estimated losses from
our subscribers’ inability to make payments that they owe us. In order
to estimate the appropriate level of this allowance, we analyze historical
bad debts, current economic trends and changes in our customer payment
patterns. If the financial condition of our subscribers were to deteriorate
and to impair their ability to make payments to us, additional allowances
might be required in future periods. Changes to allowances may be required
if the financial condition of our customers improves or deteriorates or if
we adjust our credit standards for new customers, thereby resulting in
collection patterns that differ from historical experience.
Valuation Allowance for Deferred Tax Assets
We record valuation allowances related to tax effects of deductible
temporary differences and loss carry forwards when it is more likely
than not that some or all of the deferred tax assets will not be realized
in the future. These evaluations are based on expectations of future
taxable income, reversals of the various taxable temporary differences
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