DIRECTV 2012 Annual Report Download - page 88

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DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)
the related services are performed. We defer programming payments received from in the Consolidated Balance Sheets. Although paid in advance, the retailer or dealer
subscribers in advance of the broadcast as ‘‘Unearned subscriber revenues and earns substantially all commissions paid for customer acquisitions over 12 months
deferred credits’’ in the Consolidated Balance Sheets until earned. We recognize from the date of subscriber activation. Should the subscriber cancel our service
revenues to be received under contractual commitments on a straight line basis over during such 12 month service period, we are reimbursed for the unearned portion
the minimum contractual period. We report revenues net of customer credits and of the commission by the retailer or dealer and record a decrease to subscriber
discounted promotions. acquisition costs. We include the amount of our set-top receivers capitalized each
period for subscriber acquisition activities in the Consolidated Statements of Cash
Broadcast Programming and Other Flows under the caption ‘‘Cash paid for property and equipment.’’ See Note 6 for
additional information.
We recognize the costs of television programming distribution rights when we
distribute the related programming. We recognize the costs of television Upgrade and Retention Costs
programming rights to distribute live sporting events for a season or tournament to
expense using the straight-line method over the course of the season or tournament. Upgrade and retention costs consist primarily of costs we incur for upgrade
efforts for existing subscribers. We include the costs of subscriber equipment
We defer advance payments in the form of cash and equity instruments from upgrade programs for digital video recorder, or DVR, high-definition, or HD, and
programming content providers for carriage of their signal and recognize them as a HD DVR receivers and local channels, our multiple set-top receiver offers and
reduction of ‘‘Broadcast programming and other’’ in the Consolidated Statements of other similar initiatives. Retention costs also include the costs of installing and
Operations on a straight-line basis over the related contract term. We record equity providing hardware under our movers program for subscribers relocating to a new
instruments at fair value based on quoted market prices or values determined by residence. We expense these costs as incurred, except for the cost of set-top receivers
management. leased to existing subscribers, which we capitalize in ‘‘Property and equipment, net’’
in the Consolidated Balance Sheets. We include the amount of our set-top receivers
Subscriber Acquisition Costs capitalized each period for upgrade and retention activities in the Consolidated
Subscriber acquisition costs consist of costs we incur to acquire new Statements of Cash Flows under the caption ‘‘Cash paid for property and
subscribers. We include the cost of set-top receivers and other equipment, equipment.’’ See Note 6 for additional information.
commissions we pay to national retailers, independent satellite television retailers,
dealers and regional telephone companies, which we refer to as telcos, and the cost Cash and Cash Equivalents
of installation, advertising, marketing and customer call center expenses associated Cash and cash equivalents consist of cash on deposit and highly liquid
with the acquisition of new subscribers in subscriber acquisition costs. We expense investments we purchase with original maturities of three months or less.
these costs as incurred, or when subscribers activate the DIRECTV威 service, as
appropriate, except for the cost of set-top receivers leased to new subscribers, which Inventories
we capitalize in ‘‘Property and equipment, net’’ in the Consolidated Balance Sheets
and depreciate over their estimated useful lives. In certain countries in Latin We state inventories at the lower of average cost or market. Inventories consist
America, where our customer agreements provide for the lease of the entire of finished goods for DIRECTV System equipment and DIRECTV System access
DIRECTV or SKY System, we also capitalize the costs of the other customer cards.
premises equipment and related installation costs in ‘‘Property and equipment, net’’
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