Dish Network 2007 Annual Report Download - page 95

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Table of Contents
ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
We consolidate all majority owned subsidiaries and investments in entities in which we have controlling influence. Non-majority owned
investments are accounted for using the equity method when we have the ability to significantly influence the operating decisions of the issuer.
When we do not have the ability to significantly influence the operating decisions of an issuer, the cost method is used. For entities that are
considered variable interest entities we apply the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 46-R,
“Consolidation of Variable Interest Entities – An Interpretation of ARB No. 51” (“FIN 46-R”). All significant intercompany accounts and
transactions have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current year
presentation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires us
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses for each reporting period. Estimates are used in
accounting for, among other things, allowances for uncollectible accounts, inventory allowances, self insurance obligations, deferred taxes and
related valuation allowances, loss contingencies, fair values of financial instruments, fair value of options granted under our stock-based
compensation plans, fair value of assets and liabilities acquired in business combinations, capital leases, asset impairments, useful lives of
property, equipment and intangible assets, retailer commissions, programming expenses, subscriber lives including those related to our co-
branding and other distribution relationships, royalty obligations and smart card replacement obligations. Actual results may differ from
previously estimated amounts, and such differences may be material to the Consolidated Financial Statements. Estimates and assumptions are
reviewed periodically, and the effects of revisions are reflected prospectively beginning in the period they occur.
Foreign Currency Translation
The functional currency of the majority of our foreign subsidiaries is the U.S. dollar because their sales and purchases are predominantly
denominated in that currency. However, for our subsidiaries where the functional currency is the local currency, we translate assets and
liabilities into U.S. dollars at the period end exchange rate and revenues and expenses based on the exchange rates at the time such transactions
arise, if known, or at the average rate for the period. The difference is recorded to equity as a component of other comprehensive income (loss).
Financial assets and liabilities denominated in currencies other than the functional currency are recorded at the exchange rate at the time of the
transaction and subsequent gains and losses related to changes in the foreign currency are included in other miscellaneous income and expense.
Net transaction gains (losses) during 2006, 2005 and 2004 were not significant.
F-8