DIRECTV 2005 Annual Report Download - page 81

Download and view the complete annual report

Please find page 81 of the 2005 DIRECTV annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 146

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146

THE DIRECTV GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —(continued)
common stock from the former GM Class H common stockholders, which provided News Corporation
with a total of 34% of our outstanding common stock. In addition, we paid to GM a special cash
dividend of $275 million in connection with the transactions.
For us, the transactions represented an exchange of equity interests by investors. As such, we
continue to account for our assets and liabilities at historical cost and did not apply purchase
accounting. We recorded the $275 million special cash dividend payment to GM as a reduction to
additional paid-in capital. We also recorded a $25.1 million decrease to additional paid-in capital
representing the difference between our 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 us. See Note 10 for additional discussion regarding the amended income
tax allocation agreement.
Upon completion of the transactions in 2003, we 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 of our employees earned about
$36 million in additional retention benefits during 2004 subsequent to the completion of the News
Corporation transactions.
Note 2: Basis of Presentation and Summary of Significant Accounting Policies
Principles of Consolidation
We present our accompanying financial statements on a consolidated basis and include our
accounts and those of our domestic and foreign subsidiaries that we control through equity ownership
or for which we are deemed to be the primary beneficiary, after elimination of intercompany accounts
and transactions. We allocate 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
We prepare our consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America, which requires us 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
Beginning in 2005, we report investments in auction rate securities as ‘‘Short-term investments’’
rather than our previous practice of reporting these investments as part of ‘‘Cash and cash equivalents’’
in our Consolidated Balance Sheets. As a result, we reclassified $522.6 million from ‘‘Cash and cash
equivalents’’ to ‘‘Short-term investments’’ in our Consolidated Balance Sheets at December 31, 2004.
Also, our cash flows from investing activities now include purchases and sales of auction rate securities.
This reclassification has no effect on our previously reported total current assets, total assets, working
capital or results of operations and does not affect our previously reported cash flows from operating
or financing activities.
68