DIRECTV 2012 Annual Report Download - page 89

DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)
Property and Equipment, Satellites and Depreciation 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
We carry property and equipment, and satellites, at cost, net of accumulated charge to operating income.
depreciation. The amounts we capitalize for satellites currently being constructed
and those that have been successfully launched include the costs of construction, We amortize other intangible assets using the straight-line method over their
launch, launch insurance, incentive obligations and capitalized interest. We generally estimated useful lives, which range from 5 to 20 years.
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 Valuation of Long-Lived Assets
asset or term of the lease. We evaluate the carrying value of long-lived assets to be held and used, other
than goodwill and intangible assets with indefinite lives, when events and
Capitalized Software Costs circumstances warrant such a review. We consider the carrying value of a long-lived
We capitalize certain software costs incurred, either from internal or external asset impaired when the anticipated undiscounted future cash flow from such asset
sources, as part of ‘‘Property and equipment, net’’ in the Consolidated Balance is separately identifiable and is less than its carrying value. In that event, we would
Sheets and depreciate these costs on a straight-line basis over the useful life of the recognize a loss based on the amount by which the carrying value exceeds the fair
software. We recognize planning, training, support and maintenance costs incurred value of the long-lived asset. We determine fair value primarily using estimated
either prior to or following the implementation phase as expense in the future cash flows associated with the asset under review, discounted at a rate
Consolidated Statements of Operations in the period in which they occur. We had commensurate with the risk involved, or other valuation techniques. We determine
unamortized capitalized software costs of $492 million as of December 31, 2012 losses on long-lived assets to be disposed of in a similar manner, except that we
and $551 million as of December 31, 2011. We recorded depreciation of these reduce the fair value for the cost of disposal.
costs of $292 million in 2012, $234 million in 2011 and $218 million in 2010 in
‘‘Depreciation and amortization expense’’ in the Consolidated Statements of Foreign Currency
Operations. The U.S. dollar is the functional currency for most of our foreign operations.
We recognize gains and losses resulting from remeasurement of these operations’
Goodwill and Intangible Assets foreign currency denominated assets, liabilities and transactions into the U.S. dollar
Goodwill and intangible assets with indefinite lives are carried at historical cost in the Consolidated Statements of Operations.
and are subject to write-down, as needed, based upon an impairment analysis that We also have foreign operations where the local currency is their functional
we must perform at least annually, or sooner if an event occurs or circumstances currency. Accordingly, these foreign entities translate assets and liabilities from their
change that would more likely than not result in an impairment loss. We perform local currencies to U.S. dollars using year-end exchange rates while income and
our annual impairment analysis in the fourth quarter of each year. We use estimates expense accounts are translated at the average rates in effect during the year. We
of fair value to determine the amount of impairment, if any, of goodwill and record the resulting translation adjustment as part of ‘‘Accumulated other
intangibles assets with indefinite lives. The goodwill evaluation requires the comprehensive loss,’’ a separate component of stockholders’ deficit in the
estimation of the fair value of reporting units where we record goodwill. We Consolidated Balance Sheets.
determine fair values primarily using estimated cash flows discounted at a rate
69