DIRECTV 2010 Annual Report Download - page 86

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DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)
inherent uncertainty involved in making estimates, our actual results reported in Subscriber Acquisition Costs
future periods may be affected by changes in those estimates. Subscriber acquisition costs consist of costs we incur to acquire new
subscribers. We include the cost of set-top receivers and other equipment,
Revenue Recognition commissions we pay to national retailers, independent satellite television retailers,
We recognize subscription and pay-per-view revenues when programming is dealers, telephone communication companies and the cost of installation,
broadcast to subscribers. We recognize subscriber fees for multiple set-top receivers, advertising, marketing and customer call center expenses associated with the
our published programming guide, warranty services and equipment rental as acquisition of new subscribers in subscriber acquisition costs. We expense these
revenue, as earned. We recognize advertising revenues when the related services are costs as incurred, or when subscribers activate the DIRECTV威 service, as
performed. We defer programming payments received from subscribers in advance appropriate, except for the cost of set-top receivers leased to new subscribers which
of the broadcast as ‘‘Unearned subscriber revenues and deferred credits’’ in the we capitalize in ‘‘Property and equipment, net’’ in the Consolidated Balance Sheets.
Consolidated Balance Sheets until earned. We recognize revenues to be received Although paid in advance, the retailer or dealer earns substantially all commissions
under contractual commitments on a straight line basis over the minimum paid for customer acquisitions over 12 months from the date of subscriber
contractual period. We report revenues net of customer credits and discounted activation. Should the subscriber cancel our service during the 12 month service
promotions. period, we are reimbursed for the unearned portion of the commission by the
retailer or dealer and record a decrease to subscriber acquisition costs. We include
Broadcast Programming and Other the amount of our set-top receivers capitalized each period for subscriber acquisition
activities in the Consolidated Statements of Cash Flows under the caption ‘‘Cash
We recognize the costs of television programming distribution rights when we paid for property and equipment.’’ See Note 5 for additional information.
distribute the related programming. We recognize the costs of television
programming rights to distribute live sporting events for a season or tournament to Upgrade and Retention Costs
expense using the straight-line method over the course of the season or tournament.
However, we charge the cost of multi-year programming contracts for live sporting Upgrade and retention costs consist primarily of costs we incur for loyalty
events with minimum guarantee payments, such as DIRECTV U.S.’ agreement programs offered to existing subscribers. The costs for loyalty programs include the
with the NFL, based on the contractual rates in the contract per season, unless the costs of installing or providing hardware under our movers program (for subscribers
contractual rates are inconsistent with the relative value of the programming from relocating to a new residence), multiple set-top receiver offers, digital video recorder,
season to season, in which case we record the expense based on the ratio of each or DVR, high-definition, or HD, local channel upgrade programs and other similar
period’s sports programming package revenues to the estimated total package initiatives, and third party commissions we incur for the sale of additional set-top
revenues to be earned over the contract period. We evaluate estimated total contract receivers to existing subscribers. We expense these costs as incurred, except for the
revenues at least annually. cost of set-top receivers leased to existing subscribers which we capitalize in
‘‘Property and equipment, net’’ in the Consolidated Balance Sheets. We include the
We defer advance payments in the form of cash and equity instruments from amount of our set-top receivers capitalized each period for upgrade and retention
programming content providers for carriage of their signal and recognize them as a activities in the Consolidated Statements of Cash Flows under the caption ‘‘Cash
reduction of ‘‘Broadcast programming and other’’ in the Consolidated Statements of paid for property and equipment.’’ See Note 5 for additional information.
Operations on a straight-line basis over the related contract term. We record equity
instruments at fair value based on quoted market prices or values determined by
management.
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