Dish Network 2007 Annual Report Download - page 104

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Table of Contents
ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
Accounting for dealer sales under our promotions fall within the scope of EITF 01-9. In accordance with that guidance, we characterize
amounts paid to our independent dealers as consideration for equipment installation services and for equipment buydowns (commissions and
rebates) as a reduction of revenue. We expense payments for equipment installation services as “Other subscriber promotion subsidies.” Our
payments for equipment buydowns represent a partial or complete return of the dealer’s purchase price and are, therefore, netted against the
proceeds received from the dealer. We report the net cost from our various sales promotions through our independent dealer network as a
component of “Other subscriber promotion subsidies.” No net proceeds from the sale of subscriber related equipment pursuant to our
subscriber acquisition promotions are recognized as revenue.
Research and Development Costs
Research and development costs are expensed as incurred. Research and development costs totaled $56.7 million, $46.1 million and
$40.0 million for the years ended December 31, 2006, 2005 and 2004, respectively.
Basic and Diluted Net Income (Loss) Per Share
Statement of Financial Accounting Standards No. 128, “Earnings Per Share” (“SFAS 128”) requires entities to present both basic earnings per
share (“EPS”) and diluted EPS. Basic EPS excludes dilution and is computed by dividing net income (loss) by the weighted-
average number of
common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if stock options were exercised and
convertible securities were converted to common stock.
The potential dilution from our subordinated notes convertible into common stock was computed using the “if converted method.” Since we
reported net income attributable to common stockholders for the years ending December 31, 2006, 2005 and 2004, the potential dilution from
stock options exercisable into common stock for these periods was computed using the treasury stock method based on the average market
value of our Class A common stock for the period. The following table reflects the basic and diluted weighted-average shares outstanding used
to calculate basic and diluted earnings per share. Earnings per share amounts for all periods are presented below in accordance with the
requirements of SFAS 128.
F-17
• “Subscriber acquisition advertising” includes advertising and marketing expenses related to the acquisition of new DISH Network
subscribers. Advertising costs generally are expensed as incurred.