DIRECTV 2005 Annual Report Download - page 96

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THE DIRECTV GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —(continued)
assets for the SPACEWAY broadband service triggered an impairment test of our investment in the
SPACEWAY assets under SFAS No. 144, ‘‘Accounting for the Impairment or Disposal of Long-Lived
Assets.’’ The SPACEWAY system was designed as a next-generation satellite-based broadband data
platform intended to upgrade and expand HNS’ broadband data businesses. Since the book value of
the SPACEWAY system had been supported by the expected cash flows from the SPACEWAY
broadband business plan that management no longer intended to pursue, the assets were considered
impaired. Further, a majority of the capitalized value of the SPACEWAY assets related to functionality
that will not be utilized for the DTH business. The impairment charge was determined by comparing
the fair value of the SPACEWAY assets to their book value as of September 30, 2004. The fair value of
the two satellites and certain related ground segment assets was determined based on the fair value of
those assets as configured to DIRECTV U.S.’ DTH business. The estimation of fair value of the two
satellites was based on an analysis performed by an independent valuation expert.
Based on the results of this analysis, we reduced the capitalized value of the SPACEWAY assets in
‘‘Satellites, net’’ by $1.099 billion to $305 million, and the capitalized value in ‘‘Property and
Equipment, net’’ by about $367 million to $30 million. These reductions were recorded as a
$1.466 billion pre-tax loss in ‘‘(Gain) loss from asset sales and impairment charges, net’’ ($903 million
after-tax) in our Consolidated Statements of Operations during the third quarter of 2004.
Note 6: Goodwill and Intangible Assets
The changes in the carrying amounts of goodwill by reporting unit for the years ended
December 31, 2005 and 2004 were as follows:
DIRECTV Network
DIRECTV U.S. Latin America Systems Total
(Dollars in Millions)
Balance as of January 1, 2004 .................. $3,031.7 $ — $ 2.4 $3,034.1
Additions and other ......................... — 12.4 (2.4) 10.0
Balance as of December 31, 2004 ................ 3,031.7 12.4 — 3,044.1
Additions and other ......................... — 1.2 — 1.2
Balance as of December 31, 2005 ................ $3,031.7 $13.6 $ — $3,045.3
We performed our annual impairment tests for goodwill and orbital slots in the fourth quarters of
2005, 2004, and 2003. The estimated fair values for each reporting unit and the orbital slots exceeded
our carrying values, and accordingly, no impairment losses were recorded during 2005, 2004, or 2003.
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