Dish Network 2013 Annual Report Download - page 95

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Continued
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specific factors relating to the business underlying the investment. Future adverse changes in these factors
could result in losses or an inability to recover the carrying value of the investments that may not be reflected
in an investment’s current carrying value, thereby possibly requiring an impairment charge in the future.
x Fair value of financial instruments. Fair value estimates of our financial instruments are made at a point
in time, based on relevant market data as well as the best information available about the financial
instrument. Sustained economic weakness has resulted in inactive markets for certain of our financial
instruments, including our Auction Rate Securities (“ARS”) and other investment securities. For certain of
these instruments, there is no or limited observable market data. Fair value estimates for financial
instruments for which no or limited observable market data is available are based on judgments regarding
current economic conditions, liquidity discounts, currency, credit and interest rate risks, loss experience and
other factors. These estimates involve significant uncertainties and judgments and may be a less precise
measurement of fair value as compared to financial instruments where observable market data is available.
We make certain assumptions related to expected maturity date, credit and interest rate risk based upon
market conditions and prior experience. As a result, such calculated fair value estimates may not be
realizable in a current sale or immediate settlement of the instrument. In addition, changes in the
underlying assumptions used in the fair value measurement technique, including liquidity risks, and
estimate of future cash flows, could significantly affect these fair value estimates, which could have a
material adverse impact on our financial condition and results of operations. For example, as of December
31, 2013, we held $134 million of securities that lack observable market quotes, and a 10% decrease in our
estimated fair value of these securities would result in a decrease of the reported amount by approximately
$13 million.
x Valuation of long-lived assets. We evaluate the carrying value of long-lived assets to be held and used, other
than goodwill and intangible assets with indefinite lives, when events and circumstances warrant such a
review. We evaluate our DBS satellite fleet for recoverability as one asset group. See Note 2 in the Notes to
our Consolidated Financial Statements in Item 15 of this Annual Report on Form 10-K. The carrying value of
a long-lived asset or asset group is considered impaired when the anticipated undiscounted cash flows from
such asset or asset group is less than its carrying value. In that event, a loss will be recorded in a new line
item entitled “Impairments of long-lived assets” on our Consolidated Statements of Operations and
Comprehensive Income (Loss) based on the amount by which the carrying value exceeds the fair value of the
long-lived asset or asset group. Fair value is determined primarily using the estimated cash flows associated
with the asset or asset group under review, discounted at a rate commensurate with the risk involved. Losses
on long-lived assets to be disposed of by sale are determined in a similar manner, except that fair values are
reduced for estimated selling costs. Among other reasons, changes in estimates of future cash flows could
result in a write-down of the asset in a future period.
x Valuation of intangible assets with indefinite lives. We evaluate the carrying value of intangible assets with
indefinite lives annually, and also when events and circumstances warrant. We use estimates of fair value to
determine the amount of impairment, if any, of recorded intangible assets with indefinite lives. Fair value is
determined using the estimated future cash flows, discounted at a rate commensurate with the risk involved or
the market approach. While our impairment tests in 2013 indicated the fair value of our intangible assets
exceeded their carrying amounts, significant changes in our estimates of future cash flows or market data
could result in a write-down of intangible assets with indefinite lives in a future period, which will be recorded
in a new line item entitled “Impairments of long-lived assets,” on our Consolidated Statements of Operations
and Comprehensive Income (Loss) and could be material to our consolidated results of operations and
financial condition. Based on the methodology utilized to test for impairment a 10% decrease in the estimated
future cash flows or market value of comparable assets and/or, a 10% increase in the discount rate used in
estimating the fair value of these assets (while all other assumptions remain unchanged) would not result in
these assets being impaired.