Dish Network 2007 Annual Report Download - page 72

Table of Contents
We do not expect the adoption of FIN 48 to have a material impact on our consolidated financial position, results of operations or effective tax
rate.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”) which defines fair value, establishes a
framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value
measurements. This pronouncement applies to other accounting standards that require or permit fair value measurements. Accordingly, this
statement does not require any new fair value measurement. This statement is effective for fiscal years beginning after November 15, 2007, and
interim periods within that fiscal year. We are currently evaluating the impact the adoption of SFAS 157 will have on our financial position and
results of operations.
In September 2006, the Securities Exchange Commission Staff issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in the Current Year Financial Statements” (“SAB 108”). SAB 108 requires companies to
quantify misstatements using both the balance sheet and income statement approaches and to evaluate whether either approach results in an
error that is material in light of relevant quantitative and qualitative factors. SAB 108 also requires the effects of prior year uncorrected
misstatements to be considered when assessing the materiality misstatements in current-year financial statements. If upon initial adoption, the
cumulative effect of the misstatements is determined to be material using the new guidance of SAB 108, companies are allowed to record the
effects as a cumulative effect adjustment to beginning of year retained earnings. SAB 108 is effective for the first fiscal year ending after
November 15, 2006.
We adopted the provisions of SAB 108 during the fourth quarter of 2006. In accordance with the transition provisions of SAB 108, we
recorded a $62.3 million cumulative increase, net of tax of $37.4 million, to accumulated deficit as of January 1, 2006. Historically, while our
financial statements reflected payments to certain programming and other vendors for a full year, each 12-month period included several days
or weeks from the prior calendar year. This discrepancy between our calendar and fiscal year for certain vendor accruals was immaterial to
prior years’
consolidated financial statements. However, the growth of our subscriber base over the past 10 years has increased this discrepancy
resulting in a cumulative increase to opening accumulated deficit of $78.4 million for programming obligations and $21.3 million for other
vendor obligations.
We concluded that these adjustments are immaterial to prior years’ consolidated financial statements under our previous method of assessing
materiality, and therefore elected, as permitted under the transition provisions of SAB 108, to reflect the effect of these adjustments in liabilities
as of January 1, 2006, with the offsetting adjustment reflected as a cumulative effect adjustment to opening accumulated deficit as of January 1,
2006.
Seasonality
Our revenues vary throughout the year. As is typical in the subscription television service industry, the first half of the year generally produces
fewer new subscribers than the second half of the year. Our operating results in any period may be affected by the incurrence of advertising and
promotion expenses that do not necessarily produce commensurate revenues until the impact of such advertising and promotion is realized in
future periods.
Inflation
Inflation has not materially affected our operations during the past three years. We believe that our ability to increase the prices charged for our
products and services in future periods will depend primarily on competitive pressures. We do not have any material backlog of our products.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risks Associated With Financial Instruments
As of December 31, 2006, our restricted and unrestricted cash, cash equivalents and marketable investment securities had a fair value of
$3.206 billion. Of that amount, a total of $2.884 billion was invested in: (a) cash; (b) debt instruments of the U.S. Government and its agencies;
(c) commercial paper and notes with an overall average maturity of less than one year and rated in one of the four highest rating categories by
at least two nationally recognized statistical rating organizations; and (d) instruments with similar risk characteristics to the commercial paper
described above. The primary purpose of these investing activities has been to preserve principal until the cash is required to,
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Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS —
Continued