Dish Network 2005 Annual Report Download - page 99

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued
F–14
historical subscriber churn trends. With respect to receivers we lease, we would record the expenses of replacement
as incurred. The total replacement cost could exceed $100.0 million.
Long-Term Deferred Revenue, Distribution and Carriage Payments
Certain programmers provide us up-front payments. Such amounts are deferred and in accordance with EITF Issue
No. 02-16, “Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor”
(“EITF 02-16”) are recognized as reductions to “Subscriber-related expenses” on a straight-line basis over the
relevant remaining contract term (up to 10 years). The current and long-term portions of these deferred credits are
recorded in the Consolidated Balance Sheets in “Deferred revenue and other” and “Long-term deferred revenue,
distribution and carriage payments and other long-term liabilities,” respectively.
We receive equity interests in content providers in consideration for or in conjunction with affiliation agreements.
We account for these equity interests received in accordance with Emerging Issues Task Force Issue No. 00-8,
“Accounting by a Grantee for an Equity Instrument to be Received in Conjunction with Providing Goods or
Services” (“EITF 00-8”). During the years ended December 31, 2006, 2005 and 2004, we made cash payments and
entered into agreements and in 2004 assumed certain liabilities in exchange for equity interests in certain entities.
During 2006, 2005 and 2004, we recorded approximately $25.0 million, nil and $77.3 million related to the fair
value of these equity interests in “Other noncurrent assets,” respectively. These unconsolidated investments are
accounted for under either the equity method or cost method of accounting. Of the amounts recorded during 2006,
2005 and 2004, approximately $25.0 million, nil and $56.5 million in value of these equity interests was recorded as
a deferred credit, respectively, and are recognized as a reduction to “Subscriber-related expenses” ratably as our
actual costs are incurred under the related agreements in accordance with the guidance under EITF 02-16. These
deferred credits are included as a component of current “Deferred revenue and other” and “Long-term deferred
revenue, distribution and carriage payments and other long-term liabilities” in our Consolidated Balance Sheets.
Sales Taxes
In accordance with the guidance of EITF Issue No. 06-3, “How Taxes Collected from Customers and Remitted to
Governmental Authorities Should Be Presented in the Income Statement” (“EITF 06-3”), we account for sales taxes
imposed on our goods and services on a net basis in our “Consolidated Statements of Operations and
Comprehensive Income (Loss).” Since we primarily act as an agent for the governmental authorities, the amount
charged to the customer is collected and remitted directly to the appropriate jurisdictional entity.
Income Taxes
We establish a provision for income taxes currently payable or receivable and for income tax amounts deferred to
future periods in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income
Taxes” (“SFAS 109”). SFAS 109 requires that deferred tax assets or liabilities be recorded for the estimated future
tax effects of differences that exist between the book and tax bases of assets and liabilities. Deferred tax assets are
offset by valuation allowances in accordance with SFAS 109, when we believe it is more likely than not that such
net deferred tax assets will not be realized.
Fair Value of Financial Instruments
Fair values for our publicly traded debt securities are based on quoted market prices. The fair values of our private
debt is estimated based on an analysis in which we evaluate market conditions, related securities, various public and
private offerings, and other publicly available information. In performing this analysis, we make various
assumptions, among other things, regarding credit spreads, and the impact of these factors on the value of the notes.