Dish Network 1998 Annual Report Download - page 61

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued
F–14
EchoStar reviews its long-lived assets and identifiable intangible assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For
assets which are held and used in operations, the asset would be impaired if the book value of the asset
exceeded the undiscounted future net cash flows related to the asset. For those assets which are to be
disposed of, the assets would be impaired to the extent the fair value does not exceed the book value.
EchoStar considers relevant cash flow, estimated future operating results, trends and other available
information including the fair value of frequency rights owned, in assessing whether the carrying value
of assets are recoverable.
FCC Authorizations
FCC authorizations are recorded at cost and amortized using the straight-line method over a period of 40
years. Such amortization commences at the time the related satellite becomes operational; capitalized costs are written
off at the time efforts to provide services are abandoned. FCC authorizations include interest capitalized of $6 million,
$11 million and $6 million during the years ended December 31, 1996, 1997 and 1998, respectively.
Revenue Recognition
Revenue from the provision of DISH Network subscription television services and satellite services is recognized as revenue in the
period such services are provided. Revenue from sales of digital set-top boxes and related accessories is recognized upon shipment
to customers. Revenue from the provision of integration services is recognized as revenue in the period the services are performed.
Subscriber Promotion Subsidies and Subscriber Acquisition Costs
In August 1996, EchoStar began selling its EchoStar receiver systems below its manufactured cost to
consumers conditioned upon the consumer’s one-year prepaid subscription to the DISH Network’s America’s Top
50 CD programming package. From August 1996 through September 1997, the excess of EchoStar’s aggregate costs
(equipment, programming and other) over proceeds from equipment sales and prepaid programming was expensed
(“subscriber promotion subsidies”) upon shipment of the equipment. Remaining costs were deferred (“subscriber
acquisition costs”) and amortized over the term of the prepaid subscription (normally one year). Effective
October 1997, promotional programs changed and new subscribers were not required to prepay for a year of
programming. Consequently, EchoStar began expensing subscriber acquisition costs as incurred. As of
December 31, 1998, all previously deferred costs were fully amortized.
Deferred Debt Issuance Costs and Debt Discount
Costs of issuing the 1994 Notes, the 1996 Notes and the 1997 Notes were deferred and are being amortized to interest expense over
the terms of the respective notes. The original issue discounts related to the 1994 Notes and the 1996 Notes are being accreted to
interest expense so as to reflect a constant rate of interest on the accreted balance of the 1994 Notes and the 1996 Notes.
Deferred Revenue
Deferred revenue principally consists of prepayments received from subscribers for DISH Network programming. Such
amounts are recognized as revenue in the period the programming is provided to the subscriber.
Long-Term Deferred Satellite Services Revenue
Long-term deferred satellite services revenue consists of advance payments from certain content providers
for carriage of their signal on the DISH Network. Such amounts are deferred and recognized as revenue on a
straight-line basis over the related contract terms (up to ten years).