DIRECTV 2002 Annual Report Download - page 90

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HUGHES ELECTRONICS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)
The following represents Hughes’ reported net income (loss) and reported income (loss) before
cumulative effect of accounting changes on a comparable basis excluding the after-tax effect of
amortization expense associated with goodwill and intangible assets with indefinite lives:
2002 2001 2000
(Dollars in Millions)
Reported net income (loss) ..................................... $(893.8) $(621.6) $ 813.0
Add:
Goodwill amortization ........................................ — 219.9 215.1
Intangible assets with indefinite lives amortization ................. — 7.2 7.2
Adjusted net income (loss) ...................................... $(893.8) $(394.5) $1,035.3
Reported income (loss) before cumulative effect of accounting
changes ................................................... $(212.5) $(614.2) $ 813.0
Add:
Goodwill amortization ........................................ — 219.9 215.1
Intangible assets with indefinite lives amortization ................. — 7.2 7.2
Adjusted income (loss) before cumulative effect of accounting
changes ................................................... $(212.5) $(387.1) $1,035.3
Hughes adopted SFAS No. 141, “Business Combinations” on July 1, 2001. SFAS No. 141
required that all business combinations initiated after June 30, 2001 be accounted for under the
purchase method and prohibited the amortization of goodwill and intangible assets with indefinite lives
acquired thereafter. The adoption of SFAS No. 141 did not have a significant impact on Hughes’
consolidated results of operations or financial position.
Hughes adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,”
on January 1, 2001. SFAS No. 133 required Hughes to carry all derivative financial instruments on the
balance sheet at fair value. In accordance with the transition provisions of SFAS No. 133, Hughes
recorded a one-time after-tax charge of $7.4 million on January 1, 2001 as a cumulative effect of
accounting change in the Consolidated Statements of Operations and Available Separate Consolidated
Net Income (Loss) and an after-tax unrealized gain of $0.4 million in “Accumulated other
comprehensive income (loss).”
New Accounting Standards
In January 2003, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation
No. 46, “Consolidation of Variable Interest Entities—an interpretation of ARB No. 51” (“FIN 46”). FIN 46
requires the consolidation of affiliated companies where a controlling financial interest is achieved
through arrangements other than voting interests. Affiliated companies are considered variable interest
entities in instances where affiliate capital is insufficient to permit the affiliate to finance its activities
without additional subordinated financial support, and in certain other circumstances. The
determination as to whether an affiliate is a variable interest entity must be based on the circumstances
on the date that an entity becomes involved with an affiliate or when certain events occur that would
indicate a potential change in a previous determination. Consolidation of an affiliate is required when it
is determined that the affiliate is a variable interest entity and that the investor will absorb a majority of
the expected losses or residual returns if they occur. As required, Hughes will apply the provisions of
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