Dish Network 2007 Annual Report Download - page 99

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Table of Contents
ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
Inventories consist of the following:
Property and Equipment
Property and equipment are stated at cost. Cost includes capitalized interest of $20.1 million, $7.6 million, and $3.1 million during the years
ended December 31, 2006, 2005 and 2004, respectively. The costs of satellites under construction, including certain amounts prepaid under our
satellite service agreements, are capitalized during the construction phase, assuming the eventual successful launch and in-
orbit operation of the
satellite. If a satellite were to fail during launch or while in-orbit, the resultant loss would be charged to expense in the period such loss was
incurred. The amount of any such loss would be reduced to the extent of insurance proceeds estimated to be received, if any. Depreciation is
recorded on a straight-line basis over lives ranging from one to forty years. Repair and maintenance costs are charged to expense when
incurred. Renewals and betterments are capitalized.
Long
-Lived Assets
We account for impairments of long-lived assets in accordance with the provisions of Statement of Financial Accounting Standards No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”). We review our 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. Based
on the guidance under SFAS 144, we evaluate our satellite fleet for recoverability as one asset group. For assets which are held and used in
operations, the asset would be impaired if the carrying value of the asset (or asset group) exceeded its undiscounted future net cash flows. Once
an impairment is determined, the actual impairment is reported as the difference between the carrying value and the fair value as estimated
using discounted cash flows. Assets which are to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
We consider relevant cash flow, estimated future operating results, trends and other available information in assessing whether the carrying
value of assets are recoverable.
Goodwill and Intangible Assets
We account for our goodwill and intangible assets in accordance with the provisions of Statement of Financial Accounting Standards No. 142,
“Goodwill and Other Intangible Assets” (“SFAS 142”), which requires goodwill and intangible assets with indefinite useful lives not be
amortized, but to be tested for impairment annually or whenever indicators of impairments arise. Intangible assets that have finite lives
continue to be amortized over their estimated useful lives. Our intangible assets consist primarily of FCC licenses. Generally, we have
determined that our FCC licenses have indefinite useful lives due to the following:
F-12
As of December 31,
2006
2005
(In thousands)
Finished goods
—
DBS
$
132,604
$
140,955
Raw materials
50,039
55,115
Work
-
in
-
process
—
service repair and refurbishment
51,870
23,705
Work
-
in
-
process
—
new
14,203
10,936
Consignment
1,669
803
Inventory allowance
(12,878
)
(10,185
)
Inventories, net
$
237,507
$
221,329
•
FCC spectrum is a non
-
depleting asset;
•
Existing DBS licenses are integral to our business and will contribute to cash flows indefinitely;