Dish Network 2009 Annual Report Download - page 105

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DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-15
Subscriber Acquisition Costs
Subscriber acquisition costs in our Consolidated Statements of Operations and Comprehensive Income (Loss) consist
of costs incurred to acquire new subscribers through third parties and our direct sales distribution channel. Subscriber
acquisition costs include the following line items from our Consolidated Statements of Operations and Comprehensive
Income (Loss):
x “Cost of sales – subscriber promotion subsidies” includes the cost of our receiver systems sold to retailers and
other distributors of our equipment and receiver systems sold directly by us to subscribers.
x “Other subscriber promotion subsidies” includes net costs related to promotional incentives and costs related
to installation.
x “Subscriber acquisition advertising” includes advertising and marketing expenses related to the acquisition of
new DISH Network subscribers. Advertising costs are expensed as incurred.
We characterize amounts paid to our independent dealers as consideration for equipment installation services and for
equipment buydowns (incentives 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.” Net proceeds from the sale of subscriber related equipment
pursuant to our subscriber acquisition promotions are not recognized as revenue.
Equipment Lease Programs
DISH Network subscribers have the choice of leasing or purchasing the satellite receiver and other equipment
necessary to receive our programming. Most of our new subscribers choose to lease equipment and thus we retain title
to such equipment. Equipment leased to new and existing subscribers is capitalized and depreciated over their
estimated useful lives.
Research and Development Costs
Research and development costs are expensed as incurred. For the years ended December 31, 2009 and 2008, we did
not incur any research and development costs. For the year ended December 31, 2007, research and development costs
were $79 million. The research and development costs incurred in 2007 related to the set-top box business and
acquisition of Sling Media which were distributed to EchoStar in connection with the Spin-off.
New Accounting Pronouncements
Revenue Recognition – Multiple-Deliverable Arrangements
In October 2009, the FASB issued Accounting Standards Update 2009-13 (“ASU 2009-13”), Revenue Recognition -
Multiple-Deliverable Revenue Arrangements. ASU 2009-13 changes the requirements for establishing separate units
of accounting in a multiple element arrangement and requires the allocation of arrangement consideration to each
deliverable to be based on the relative selling price. We are currently evaluating the impact, if any, ASU 2009-13
will have on our consolidated financial statements, when adopted, as required, on January 1, 2011.