DIRECTV 2010 Annual Report Download - page 88

DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)
cost basis of the security to fair value and recognize the amount in the We recognize a benefit in ‘‘Income tax expense’’ in the Consolidated
Consolidated Statements of Operations as part of ‘‘Other, net’’ and record it as a Statements of Operations for uncertain tax positions that are more-likely-than-not
reclassification adjustment from OCI. to be sustained upon examination, measured at the largest amount that has a
greater than 50% likelihood of being realized upon settlement. Unrecognized tax
We account for investments in which we own at least 20% of the voting benefits represent tax benefits taken or expected to be taken in income tax returns,
securities or have significant influence under the equity method of accounting. We for which the benefit has not yet been recognized in ‘‘Income tax expense’’ in the
record equity method investments at cost and adjust for the appropriate share of Consolidated Statements of Operations due to the uncertainty of whether such
the net earnings or losses of the investee. We record investee losses up to the benefits will be ultimately realized. We recognize interest and penalties accrued
amount of the investment plus advances and loans made to the investee, and related to unrecognized tax benefits in ‘‘Income tax expense’’ in the Consolidated
financial guarantees made on behalf of the investee. Statements of Operations. Unrecognized tax benefits are recorded in ‘‘Income tax
The carrying value of cash and cash equivalents, accounts receivable, expense’’ in the Consolidated Statement of Operations at such time that the benefit
investments and other assets, accounts payable, and amounts included in accrued is effectively settled.
liabilities and other meeting the definition of a financial instrument approximated
their fair values at December 31, 2010 and 2009. Advertising Costs
We expense advertising costs primarily in ‘‘Subscriber acquisition costs’’ in the
Debt Issuance Costs Consolidated Statements of Operations as incurred. Advertising expenses, net of
We defer costs we incur to issue debt and amortize these costs to interest payments received from programming content providers for marketing support,
expense using the straight-line method over the term of the respective obligation. were $342 million in 2010, $317 million in 2009 and $301 million in 2008.
Share-Based Payment Market Concentrations and Credit Risk
We grant restricted stock units and common stock options to certain We sell programming services and extend credit, in amounts generally not
employees and directors. exceeding $200 each, to a large number of individual residential subscribers
throughout the United States and most of Latin America. As applicable, we
We record compensation expense equal to the fair value of stock-based awards maintain allowances for anticipated losses.
at the date approved on a straight-line basis over the requisite service period of up
to three years, reduced for estimated forfeitures and adjusted for anticipated payout Fair Value Measurement
percentages related to the achievement of performance targets.
We determine the fair value measurements of assets and liabilities based on the
Income Taxes three level valuation hierarchy established for classification of fair value
measurements. The valuation hierarchy is based on the transparency of inputs to
We determine deferred tax assets and liabilities based on the difference the valuation of an asset or liability as of the measurement date. Inputs refer
between the financial statement and tax basis of assets and liabilities, using enacted broadly to the assumptions that market participants would use in pricing an asset
tax rates in effect for the year in which we expect the differences to reverse. We
must make certain estimates and judgments in determining income tax provisions,
assessing the likelihood of recovering our deferred tax assets, and evaluating tax
positions.
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