Clear Channel Outdoor Holdings Inc

The preparation of our financial statements in conformity with U.S. generally accepted accounting principles requires Company management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, we evaluate our estimates that are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The results of these evaluations form the basis for making judgments about the carrying values of assets and liabilities and the reported amount of revenue and expenses that are not readily apparent from other sources. Because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such difference could be material.

Our significant accounting policies are discussed in the Notes to our Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. Management believes that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and they require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. The following narrative describes these critical accounting estimates, management's judgments and assumptions, and the effect if actual results differed from these assumptions.

Long-lived Assets

We estimate the useful lives for our long-lived assets, including structures, other property, plant and equipment, permits and other finite-lived intangible assets, based on our historical experience and our plans regarding how we intend to use those assets. For example, advertising structures have different lives depending on their nature, with large format bulletins generally having longer depreciable lives and posters and other displays having shorter depreciable lives; the useful lives of permits are dependent upon the market; and transit, street furniture and other contractual rights are amortized over their estimated useful lives or appropriate contractual periods, whichever is shorter. We periodically re-evaluate the estimated useful lives of our long-lived assets for continued reasonableness based on current events and circumstances. When we determine that a long-lived asset will be disposed of prior to the end of its useful life, we estimate the revised useful life and depreciate the remaining net book value of the asset over the revised period.

We review long-lived assets for impairment when events and circumstances indicate that depreciable and amortizable long-lived assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. Our impairment calculations require management to apply judgment in estimating future cash flows, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows. When specific assets are determined to be unrecoverable, we reduce the cost basis of the asset to reflect the current fair market value. We use various assumptions in determining the current fair market value of long-lived assets that are determined to be unrecoverable, including future expected cash flows, industry growth rates, discount rates and future salvage values. We did not recognize any impairments on our long-lived assets in 2023, 2022 or 2021. However, if actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be exposed to future impairment losses that could be material to our results of operations.

We perform an impairment test on goodwill at least annually, as of July 1 of each year, and more frequently as events or changes in circumstances warrant. The discounted cash flow approach that we use for valuing goodwill as part of our impairment testing approach involves estimating future cash flows expected to be generated from the related assets, discounted to their present value using a risk-adjusted discount rate. Terminal values are also estimated and discounted to their present value. Assessing the recoverability of goodwill requires us to make estimates and assumptions about sales, operating margins, growth rates and discount rates based on our budgets, business plans, economic projections, anticipated future cash flows and marketplace data.

Our annual impairment test as of July 1, 2023 did not result in any impairment. In determining the fair value of our reporting units, we used the following assumptions:

•Expected cash flows underlying our business plans for the initial 4.5-year period were based on detailed, multi-year forecasts performed by each of our operating segments and reflected the advertising outlook across our businesses;

•Cash flows were projected to grow at a perpetual growth rate, which we estimated at 3.0%; and

•In order to risk-adjust the cash flow projections in determining fair value, we utilized a discount rate for each of our reporting units ranging from 10.5% to 15.0%.

Based on our assessment using the assumptions described above, a hypothetical 10% reduction in the estimated fair value of each of our reporting units with goodwill would not have resulted in an impairment.

The following table shows the decrease in the fair value of each of our reporting units with goodwill that would have resulted from decreases of 100 basis points in our discrete and terminal period revenue growth rate and profit margin assumptions and an increase of 100 basis points in our discount rate assumption as of July 1, 2023:

(1)Changes to our assumptions by these amounts would not have resulted in goodwill impairment as the fair value of each reporting unit would still be greater than its carrying value.

There were no indicators of impairment as of December 31, 2023. While we believe we have made reasonable estimates and utilized appropriate assumptions to calculate the fair value of our reporting units, the assumptions are not necessarily indicative of future results, and it is possible that a material change could occur. If future results are not consistent with our assumptions and estimates, we may be exposed to impairment charges in the future.

Leases

The most significant estimate used by Company management in accounting for leases is the incremental borrowing rate (“IBR”), which we use to determine the present value of lease payments at the commencement of a lease. An increase in the IBR would decrease the net present value of the minimum lease payments and, therefore, reduce the probability that a lease would be considered a finance lease.

In our U.S. business, we calculate the IBR monthly based on the existing yield of our most recently issued secured debt, currently the CCOH 9.000% Senior Secured Notes, which is extrapolated over a 30-year time horizon using a composite credit rating yield curve. Internationally, we apply a portfolio approach using interest rate parity theory, in which we further adjust the IBR of our U.S. business to arrive at country-specific IBRs based on the expected appreciation or depreciation of each country’s local currency compared to the U.S. Dollar.

Tax Provisions

Our estimates of income taxes and the significant items giving rise to deferred tax assets and liabilities reflect our assessment of actual future taxes to be paid on items reflected in the financial statements, giving consideration to both timing and probability of these estimates. Actual income taxes could vary from these estimates due to future changes in income tax law or results from the final review of our tax returns by federal, state or foreign tax authorities.

We use our best and most informed judgment to determine whether it is more likely than not that our deferred tax assets will be realized. Deferred tax assets are reduced by valuation allowances if we believe it is more likely than not that some portion or the entire asset will not be realized.

We also use our best and most informed judgment to determine whether it is more likely than not that we will sustain positions that we have taken on tax returns and, if so, the amount of benefit to initially recognize within our financial statements. We regularly review our uncertain tax positions and adjust our unrecognized tax benefits (“UTBs”) in light of changes in facts and circumstances, such as changes in tax law, interactions with taxing authorities and developments in case law. These adjustments to our UTBs may affect our income tax expense, and settlement of uncertain tax positions may require use of our cash.

Litigation Accruals

We are currently involved in certain legal proceedings. Based on current assumptions, we have accrued an estimate of the probable costs for the resolution of those claims for which the occurrence of loss is probable and the amount can be reasonably estimated. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. Future results of operations could be materially affected by changes in these assumptions or the effectiveness of our strategies related to these proceedings.

NEW ACCOUNTING PRONOUNCEMENTS

For a description of the expected impact of newly issued but not yet adopted accounting pronouncements on our financial position and results of operations, refer to Note 2 to our Consolidated Financial Statements located in Item 8 of this Annual Report on Form 10-K.