DIRECTV 2007 Annual Report Download - page 110

THE DIRECTV GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)
$33 million, which was paid into escrow. Oral arguments on the appeal and cross-appeal were heard by
the Court on January 7, 2008.
Based on our review of the record in this case, including discussion with and analysis by counsel of
the bases for our appeal, we have determined that we have a number of strong arguments available on
appeal and, although there can be no assurance as to the ultimate outcome, we are confident that the
judgment against us will ultimately be reversed, or remanded for a new trial in which we believe we
would prevail. As a result, we have concluded that it is not probable that Finisar will ultimately prevail
in this matter; therefore, we have not recorded any liability for this judgment nor are we recording any
expense for the compulsory license.
Income Tax Matters
In the second quarter of 2007, we recorded a $17 million reduction to our unrecognized tax
benefits as a result of the settlement of a foreign withholding tax dispute from a previously divested
business, which we included in ‘‘Income from discontinued operations, net of taxes’’ in the
Consolidated Statements of Operations.
In the second quarter of 2005, a settlement was reached in connection with adjustments proposed
by the IRS for the tax years 1991 through 1994 in regards to the determination and allocation of the
purchase price with respect to a prior business acquisition. As a result of the favorable settlement, we
recognized an income tax benefit of approximately $31 million which was reported in ‘‘Income from
discontinued operations, net of taxes’’ in our Consolidated Statements of Operations.
We have received tax assessments from certain foreign jurisdictions and have agreed to indemnify
previously divested businesses for certain tax assessments relating to periods prior to their respective
divestitures. These assessments are in various stages of the administrative process or litigation, and we
believe we have adequately provided for any related liability.
While the outcome of these assessments and other tax issues cannot be predicted with certainty,
we believe that the ultimate outcome will not have a material effect on our consolidated results of
operations or financial position.
Satellites
We may purchase in-orbit and launch insurance to mitigate the potential financial impact of
satellite launch and in-orbit failures if the premium costs are considered economic relative to the risk
of satellite failure. The insurance generally covers the unamortized book value of covered satellites. We
do not insure against lost revenues in the event of a total or partial loss of the capacity of a satellite.
We generally rely on in-orbit spare satellites and excess transponder capacity at key orbital slots to
mitigate the impact a satellite failure could have on our ability to provide service. At December 31,
2007, the net book value of in-orbit satellites was $1,552 million, of which $1,327 million was uninsured.
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