DIRECTV 2011 Annual Report Download - page 121

DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)
$265 million based on the valuation performed by the independent investment no charges for the repatriation of cash in 2011. Our ability to pay U.S. dollar
bank. As of December 31, 2010 we estimated that Globo’s 7% equity interest in denominated obligations and repatriate cash generated in Venezuela in excess of
Sky Brazil had a fair value of approximately $224 million. Adjustments to the local operating requirements is limited, resulting in an increase in the cash balance
carrying amount of the redeemable noncontrolling interest are recorded to at our Venezuelan subsidiary. At such time that exchange controls are eased,
additional paid-in-capital. We determined the fair values using significant accumulated cash balances may ultimately be repatriated at less than their currently
unobservable inputs, which are Level 3 inputs under accounting guidance for reported value, as the official exchange rate has not changed despite continuing
measuring fair value. high inflation in Venezuela. In addition, in the event of a significant devaluation of
the bolivar fuerte, we may recognize a charge to earnings based on the amount of
Venezuela Devaluation and Exchange Controls bolivar fuerte denominated net monetary assets (monetary assets net of monetary
liabilities) held at the time of such devaluation. These conditions are also expected
In January 2010, the Venezuelan government announced the creation of a dual to affect growth in our Venezuelan business which is dependent on our ability to
exchange rate system, including an exchange rate of 4.3 bolivars fuerte per U.S. purchase set-top boxes and other components using U.S. dollars.
dollar for most of the activities of our Venezuelan operations compared to an
exchange rate of 2.15 Venezuelan bolivars fuerte prior to the announcement. As a Using the official 4.3 bolivars fuerte per U.S. dollar exchange rate as of
result of this devaluation, we recorded a $6 million charge to net income in the December 31, 2011, our Venezuelan subsidiary had Venezuelan bolivar fuerte
year ended December 31, 2010 related to the adjustment of net bolivars fuerte denominated net monetary assets of $285 million, including cash of $401 million
denominated monetary assets to the new official exchange rate. We began reporting as of December 31, 2011.
the operating results of our Venezuelan subsidiary in the first quarter of 2010 using
the devalued rate of 4.3 bolivars fuerte per U.S. dollar. In December 2010, the Litigation
Venezuelan government announced the elimination of the dual exchange rate Litigation is subject to uncertainties and the outcome of individual litigated
system, eliminating the 2.6 bolivars fuerte per U.S. dollar preferential rate which matters is not predictable with assurance. Various legal actions, claims and
was available for certain activities. proceedings are pending against us arising in the ordinary course of business. We
Companies operating in Venezuela are required to obtain Venezuelan have established loss provisions for matters in which losses are probable and can be
government approval to exchange Venezuelan bolivars fuerte into U.S. dollars at the reasonably estimated. Some of the matters may involve compensatory, punitive, or
official rate. We have not been able to consistently exchange Venezuelan bolivars treble damage claims, or demands that, if granted, could require us to pay damages
fuerte into U.S. dollars at the official rate and as a result, we have relied on a or make other expenditures in amounts that could not be estimated at
parallel exchange process to settle U.S. dollar obligations and to repatriate December 31, 2011. After discussion with counsel representing us in those actions,
accumulated cash balances prior to its close. The rates implied by transactions in it is the opinion of management that such litigation is not expected to have a
the parallel market, which was closed in May 2010, were significantly higher than material effect on our consolidated financial statements. We expense legal costs as
the official rate (6 to 7 bolivars fuerte per U.S. dollar). As a result, we recorded a incurred.
$22 million charge in 2010 and a $213 million charge in 2009 in ‘‘General and Pegasus Development Corporation and Personalized Media Communications L.L.C.
administrative expenses’’ in the Consolidated Statements of Operations in In December, 2000, Pegasus Development Corporation, or Pegasus, and
connection with the exchange of accumulated Venezuelan cash balances to U.S. Personalized Media Communications L.L.C., or PMC, filed suit in the United
dollars using the parallel exchange process. States District Court for the District of Delaware against DIRECTV, Inc., Hughes
As a result of the closing of the parallel exchange process in May 2010, we Electronics Corporation, Thomson Consumer Electronics, Inc., and Philips
have been unable to repatriate excess cash balances and as a result, we have realized Electronics North America Corporation. The suit alleged infringement of certain
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