DIRECTV 2011 Annual Report Download - page 89

Download and view the complete annual report

Please find page 89 of the 2011 DIRECTV annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 152

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152

DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)
We base our estimates and assumptions on historical experience and on various Operations on a straight-line basis over the related contract term. We record equity
other factors that we believe to be reasonable under the circumstances. Due to the instruments at fair value based on quoted market prices or values determined by
inherent uncertainty involved in making estimates, our actual results reported in management.
future periods may be affected by changes in those estimates.
Subscriber Acquisition Costs
Revenue Recognition Subscriber acquisition costs consist of costs we incur to acquire new
We enter into multiple-deliverable revenue arrangements with our subscribers subscribers. We include the cost of set-top receivers and other equipment,
under which we provide DIRECTV receiving equipment and installation at the commissions we pay to national retailers, independent satellite television retailers,
inception of the arrangement, and programming during their contract period, of up dealers, telephone communication companies and the cost of installation,
to two years. We allocate consideration to each deliverable in the arrangement based advertising, marketing and customer call center expenses associated with the
on its relative selling price. We determine the selling price of the DIRECTV acquisition of new subscribers in subscriber acquisition costs. We expense these
receiving equipment using our best estimate. We determine the selling price for costs as incurred, or when subscribers activate the DIRECTVservice, as
installation services based on prices charged by third parties. We determine the appropriate, except for the cost of set-top receivers leased to new subscribers, which
selling price of the programming using our standard programming rates. The we capitalize in ‘‘Property and equipment, net’’ in the Consolidated Balance Sheets
DIRECTV receiving equipment, installation services and programming are each and depreciate over their estimated useful lives. In certain countries in Latin
considered separate units of accounting. America, where our customer agreements provide for the lease of the entire
DIRECTV or SKY System, we also capitalize the costs of the other customer
We recognize subscription and pay-per-view revenues when programming is premises equipment and related installation costs in ‘‘Property and equipment, net’’
broadcast to subscribers. We recognize subscriber fees for multiple set-top receivers in the Consolidated Balance Sheets. Although paid in advance, the retailer or dealer
and warranty services as revenue, as earned. We recognize advertising revenues when earns substantially all commissions paid for customer acquisitions over 12 months
the related services are performed. We defer programming payments received from from the date of subscriber activation. Should the subscriber cancel our service
subscribers in advance of the broadcast as ‘‘Unearned subscriber revenues and during such 12 month service period, we are reimbursed for the unearned portion
deferred credits’’ in the Consolidated Balance Sheets until earned. We recognize of the commission by the retailer or dealer and record a decrease to subscriber
revenues to be received under contractual commitments on a straight line basis over acquisition costs. We include the amount of our set-top receivers capitalized each
the minimum contractual period. We report revenues net of customer credits and period for subscriber acquisition activities in the Consolidated Statements of Cash
discounted promotions. Flows under the caption ‘‘Cash paid for property and equipment.’’ See Note 6 for
additional information.
Broadcast Programming and Other
We recognize the costs of television programming distribution rights when we Upgrade and Retention Costs
distribute the related programming. We recognize the costs of television Upgrade and retention costs consist primarily of costs we incur for loyalty
programming rights to distribute live sporting events for a season or tournament to programs offered to existing subscribers. We include the costs of installing or
expense using the straight-line method over the course of the season or tournament. providing hardware under our movers program (for subscribers relocating to a new
We defer advance payments in the form of cash and equity instruments from residence), multiple set-top receiver offers, digital video recorder, or DVR,
programming content providers for carriage of their signal and recognize them as a high-definition, or HD, and local channel upgrade programs and other similar
reduction of ‘‘Broadcast programming and other’’ in the Consolidated Statements of initiatives. We expense these costs as incurred, except for the cost of set-top
65