DIRECTV 2007 Annual Report Download - page 78

THE DIRECTV GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)
techniques. We determine losses on long-lived assets to be disposed of in a similar manner, except that
we reduce the fair value for the cost of disposal.
Foreign Currency
The U.S. dollar is the functional currency for most of our foreign operations. We recognize gains
and losses resulting from remeasurement of these operations’ foreign currency denominated assets,
liabilities and transactions into the U.S. dollar in the Consolidated Statements of Operations.
We also have foreign operations where the local currency is their functional currency. Accordingly,
these foreign entities translate assets and liabilities from their local currencies to U.S. dollars using
year-end exchange rates while income and expense accounts are translated at the average rates in effect
during the year. We record the resulting translation adjustment as part of accumulated other
comprehensive income (loss), which we refer to as OCI, a separate component of stockholders’ equity.
Investments and Financial Instruments
We maintain investments in equity securities of unaffiliated companies. We carry non-marketable
equity securities at cost. We consider marketable equity securities available-for-sale and they are carried
at current fair value based on quoted market prices with unrealized gains or losses (excluding
other-than-temporary losses), net of taxes, reported as part of OCI. We continually review our
investments to determine whether a decline in fair value below the cost basis is
‘‘other-than-temporary.’’ We consider, among other factors: the magnitude and duration of the decline;
the financial health and business outlook of the investee, including industry and sector performance,
changes in technology, and operational and financing cash flow factors; and our intent and ability to
hold the investment. If we judge the decline in fair value to be other-than-temporary, we write-down
the cost basis of the security to fair value and recognize the amount in the Consolidated Statements of
Operations as part of ‘‘Other, net’’ and record it as a reclassification adjustment from OCI.
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 approximated their fair values at
December 31, 2007 and 2006.
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.
Share-Based Payment
We grant restricted stock units and common stock options to our employees. We recognize
compensation expense equal to the fair value of the stock-based award at grant over the course of its
requisite service period following Statement of Financial Accounting Standards, or SFAS, No. 123
(revised 2004), ‘‘Share-Based Payment,’’ or SFAS No. 123R.
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