DIRECTV 2003 Annual Report Download - page 75

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THE DIRECTV GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)
For the Company, the transactions represented an exchange of equity interests by investors. As such, the
Company continues to account for its assets and liabilities at historical cost and did not apply purchase
accounting. The Company recorded the $275 million special cash dividend payment to GM as a reduction to
additional paid-in capital. The Company also recorded a $25.1 million decrease to additional paid-in capital
representing the difference between the Company’s consolidated tax receivable from GM as determined on a
separate return basis and the receivable determined pursuant to the amended income tax allocation agreement
between GM and the Company. See Note 9 for additional discussion regarding the amended income tax
allocation agreement.
Upon completion of the transactions, the Company expensed related costs of about $132 million that
primarily included investment advisor fees of about $49 million, retention benefits of about $65 million and
severance benefits of about $15 million. In addition, certain employees of the Company are expected to earn
about $36 million in additional retention benefits during the 12 month period subsequent to the completion of the
transactions.
Note 2: Basis of Presentation and Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying financial statements are presented on a consolidated basis and include the accounts of
the Company and its domestic and foreign subsidiaries that are more than 50% owned or otherwise controlled by
the Company after elimination of intercompany accounts and transactions. The Company allocates earnings and
losses to minority interests only to the extent of a minority investor’s investment in a subsidiary.
Use of Estimates in the Preparation of the Consolidated Financial Statements
The preparation of the consolidated financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect
amounts reported herein. Management bases its estimates and assumptions on historical experience and on
various other factors that are believed to be reasonable under the circumstances. Due to the inherent uncertainty
involved in making estimates, actual results reported in future periods may be affected by changes in those
estimates.
Reclassifications
The Company announced, in December of 2002, that DIRECTV Broadband, Inc. (“DIRECTV Broadband”)
would close its high-speed Internet service business. In the first quarter of 2003, DIRECTV Broadband
completed the transition of its existing customers to alternative service providers and shut down its high-speed
Internet service business. The results of operations and cash flows of DIRECTV Broadband have been presented
herein as discontinued operations in the Consolidated Statements of Income and the Consolidated Statements of
Cash Flows as a result of the shut down. See further discussion in Note 17.
Beginning in 2003, the Company no longer allocates general corporate expenses to its subsidiaries. Prior
period segment information has been reclassified to conform to the current period presentation.
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