DIRECTV 2011 Annual Report Download - page 91

DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)
Foreign Currency The carrying value of cash and cash equivalents, accounts receivable,
investments and other assets, accounts payable, and amounts included in accrued
The U.S. dollar is the functional currency for most of our foreign operations. liabilities and other meeting the definition of a financial instrument approximated
We recognize gains and losses resulting from remeasurement of these operations’ their fair values at December 31, 2011 and 2010.
foreign currency denominated assets, liabilities and transactions into the U.S. dollar
in the Consolidated Statements of Operations. Debt Issuance Costs
We also have foreign operations where the local currency is their functional We defer costs we incur to issue debt and amortize these costs to interest
currency. Accordingly, these foreign entities translate assets and liabilities from their expense using the straight-line method over the term of the respective obligation.
local currencies to U.S. dollars using year-end exchange rates while income and
expense accounts are translated at the average rates in effect during the year. We Share-Based Payment
record the resulting translation adjustment as part of accumulated other
comprehensive income (loss), which we refer to as OCI, a separate component of We grant restricted stock units and common stock options to certain
stockholders’ deficit. employees and directors.
We record compensation expense equal to the fair value of stock-based awards
Investments and Financial Instruments at the date approved on a straight-line basis over the requisite service period of up
We maintain investments in equity securities of unaffiliated companies. We to three years, reduced for estimated forfeitures and adjusted for anticipated payout
carry non-marketable equity securities at cost. We consider marketable equity percentages related to the achievement of performance targets.
securities available-for-sale and they are carried at current fair value based on quoted
market prices with unrealized gains or losses (excluding other-than-temporary Sales Taxes
losses), net of taxes, reported as part of OCI. We regularly review our investments Sales taxes collected and remitted to state and local authorities are recorded on
to determine whether a decline in fair value below the cost basis is a net basis.
‘‘other-than-temporary.’’ We consider, among other factors: the magnitude and
duration of the decline; the financial health and business outlook of the investee, Income Taxes
including industry and sector performance, changes in technology, and operational
and financing cash flow factors; and our intent and ability to hold the investment. We determine deferred tax assets and liabilities based on the difference
If we judge the decline in fair value to be other-than-temporary, we write-down the between the financial statement and tax basis of assets and liabilities, using enacted
cost basis of the security to fair value and recognize the amount in the tax rates in effect for the year in which we expect the differences to reverse. We
Consolidated Statements of Operations as part of ‘‘Other, net’’ and record it as a must make certain estimates and judgments in determining income tax provisions,
reclassification adjustment from OCI. assessing the likelihood of recovering our deferred tax assets, and evaluating tax
positions.
We account for investments in which we own at least 20% of the voting
securities or have significant influence under the equity method of accounting. We We recognize a benefit in ‘‘Income tax expense’’ in the Consolidated
record equity method investments at cost and adjust for the appropriate share of Statements of Operations for uncertain tax positions that are more-likely-than-not
the net earnings or losses of the investee. We record investee losses up to the to be sustained upon examination, measured at the largest amount that has a
amount of the investment plus advances and loans made to the investee, and greater than 50% likelihood of being realized upon settlement. Unrecognized tax
financial guarantees made on behalf of the investee. benefits represent tax benefits taken or expected to be taken in income tax returns,
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