DIRECTV 2011 Annual Report Download - page 90

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DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)
receivers leased to existing subscribers, which we capitalize in ‘‘Property and costs of $232 million in 2011, $218 million in 2010 and $196 million in 2009 in
equipment, net’’ in the Consolidated Balance Sheets. We include the amount of our ‘‘Depreciation and amortization expense’’ in the Consolidated Statements of
set-top receivers capitalized each period for upgrade and retention activities in the Operations.
Consolidated Statements of Cash Flows under the caption ‘‘Cash paid for property
and equipment.’’ See Note 6 for additional information. Goodwill and Intangible Assets
Goodwill and intangible assets with indefinite lives are carried at historical cost
Cash and Cash Equivalents and are subject to write-down, as needed, based upon an impairment analysis that
Cash and cash equivalents consist of cash on deposit and highly liquid we must perform at least annually, or sooner if an event occurs or circumstances
investments we purchase with original maturities of three months or less. change that would more likely than not result in an impairment loss. We perform
our annual impairment analysis in the fourth quarter of each year. We use estimates
Inventories of fair value to determine the amount of impairment, if any, of goodwill and
intangibles assets with indefinite lives. The goodwill evaluation requires the
We state inventories at the lower of average cost or market. Inventories consist estimation of the fair value of reporting units where we record goodwill. We
of finished goods for DIRECTV System equipment and DIRECTV System access determine fair values primarily using estimated cash flows discounted at a rate
cards. commensurate with the risk involved, when appropriate. If an impairment loss
results from the annual impairment test, we would record the loss as a pre-tax
Property and Equipment, Satellites and Depreciation charge to operating income.
We carry property and equipment, and satellites, at cost, net of accumulated We amortize other intangible assets using the straight-line method over their
depreciation. The amounts we capitalize for satellites currently being constructed estimated useful lives, which range from 5 to 20 years.
and those that have been successfully launched include the costs of construction,
launch, launch insurance, incentive obligations and capitalized interest. We generally Valuation of Long-Lived Assets
compute depreciation using the straight-line method over the estimated useful lives
of the assets. We amortize leasehold improvements over the lesser of the life of the We evaluate the carrying value of long-lived assets to be held and used, other
asset or term of the lease. than goodwill and intangible assets with indefinite lives, when events and
circumstances warrant such a review. We consider the carrying value of a long-lived
Capitalized Software Costs asset impaired when the anticipated undiscounted future cash flow from such asset
is separately identifiable and is less than its carrying value. In that event, we would
We capitalize certain software costs incurred, either from internal or external recognize a loss based on the amount by which the carrying value exceeds the fair
sources, as part of ‘‘Property and equipment, net’’ in the Consolidated Balance value of the long-lived asset. We determine fair value primarily using estimated
Sheets and depreciate these costs on a straight-line basis over the useful life of the future cash flows associated with the asset under review, discounted at a rate
software. We recognize planning, training, support and maintenance costs incurred commensurate with the risk involved, or other valuation techniques. We determine
either prior to or following the implementation phase as expense in the losses on long-lived assets to be disposed of in a similar manner, except that we
Consolidated Statements of Operations in the period in which they occur. We had reduce the fair value for the cost of disposal.
unamortized capitalized software costs of $544 million as of December 31, 2011
and $496 million as of December 31, 2010. We recorded depreciation of these
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