DIRECTV 2005 Annual Report Download - page 85

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THE DIRECTV GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —(continued)
We account for investments in which we own at least 20% of the voting securities or have
significant influence under the equity method of accounting. We record equity method investments at
cost and adjust for the appropriate share of the net earnings or losses of the investee. We record
investee losses up to the amount of the investment plus advances and loans made to the investee, and
financial guarantees made on behalf of the investee.
The carrying value of cash and cash equivalents, short-term investments, accounts and notes
receivable, investments and other assets, accounts payable, and amounts included in accrued liabilities
and other meeting the definition of a financial instrument or debt approximated their fair values at
December 31, 2005 and 2004.
Debt Issuance Costs
We defer costs we incur to issue debt and amortize these costs to interest expense using the
straight-line method over the term of the respective obligation.
Stock-Based Compensation
We grant restricted stock units and common stock options to our employees. For grants and
modifications of awards on or after January 1, 2003, we recognize compensation expense equal to the
fair value of the stock-based award at grant over the course of its vesting period following Statement of
Financial Accounting Standards, or SFAS, No. 123, ‘‘Accounting for Stock-Based Compensation,’’ as
amended. We accounted for stock options, restricted stock units and other stock-based awards granted
prior to January 1, 2003 under the intrinsic value method of Accounting Principles Board, or APB,
Opinion No. 25, ‘‘Accounting for Stock Issued to Employees.’’ However, due to the completion of the
News Corporation transactions on December 22, 2003, all awards were modified and therefore, all
awards are now accounted for under the fair value based method.
The following table presents the effect on loss from continuing operations before cumulative effect
of accounting change of recognizing compensation cost as if the fair value based method had been
applied to all outstanding and unvested stock options and restricted stock units for the year ended
December 31:
2003
(Dollars in
Millions, Except
Per Share
Amounts)
Reported Income (loss) from continuing operations before cumulative effect of
accounting changes .......................................... $(375.3)
Add: Stock compensation cost, net of taxes, included above .............. 11.9
Deduct: Total stock compensation cost, net of taxes, under the fair value based
method .................................................. (107.8)
Pro forma Income (loss) from continuing operations before cumulative effect
of accounting changes ........................................ $(471.2)
Basic and diluted income (loss) from continuing operations before cumulative
effect of accounting changes per common share:
Reported ............................................... $ (0.27)
Pro forma ............................................... (0.34)
72