Dish Network 2014 Annual Report Download - page 94

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Continued
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New Accounting Pronouncements
Revenue from Contracts with Customers. On May 28, 2014, the Financial Accounting Standards Board (“FASB”)
issued Accounting Standards Update 2014-09 (“ASU 2014-09”), Revenue from Contracts with Customers. This
converged standard on revenue recognition was issued jointly with the International Accounting Standards Board
(“IASB”) to improve financial reporting by creating common revenue recognition guidance for GAAP and
International Financial Reporting Standards (“IFRS”). ASU 2014-09 provides a framework for revenue recognition
that replaces most existing GAAP revenue recognition guidance when it becomes effective. ASU 2014-09 will become
effective for us on January 1, 2017, and allows for either a full retrospective or modified retrospective adoption. We
are evaluating the effect that ASU 2014-09 will have on our consolidated financial statements and related
disclosures. We have not yet selected an adoption method nor have we determined the effect of the standard on our
ongoing financial reporting.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risks Associated With Financial Instruments
Our investments and debt are exposed to market risks, discussed below.
Cash, Cash Equivalents and Current Marketable Investment Securities
As of December 31, 2014, our cash, cash equivalents and current marketable investment securities had a fair value
of $9.236 billion. Of that amount, a total of $8.525 billion was invested in: (a) cash; (b) VRDNs convertible into
cash at par value plus accrued interest generally in five business days or less; (c) debt instruments of the United
States Government and its agencies; (d) commercial paper and corporate 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/or (e) instruments with similar risk, duration and credit quality characteristics to
the commercial paper and corporate obligations described above. The primary purpose of these investing activities
has been to preserve principal until the cash is required to, among other things, fund operations, make strategic
investments and expand the business. Consequently, the size of this portfolio fluctuates significantly as cash is
received and used in our business. The value of this portfolio is negatively impacted by credit losses; however, this
risk is mitigated through diversification that limits our exposure to any one issuer.
Interest Rate Risk
A change in interest rates would affect the fair value of our cash, cash equivalents and current marketable
investment securities portfolio; however, we normally hold these investments to maturity. Based on our December
31, 2014 current non-strategic investment portfolio of $8.525 billion, a hypothetical 10% change in average interest
rates would not have a material impact on the fair value due to the limited duration of our investments.
Our cash, cash equivalents and current marketable investment securities had an average annual rate of return for the
year ended December 31, 2014 of 0.5%. A change in interest rates would affect our future annual interest income
from this portfolio, since funds would be re-invested at different rates as the instruments mature. A hypothetical
10% decrease in average interest rates during 2014 would result in a decrease of approximately $4 million in annual
interest income.
Strategic Marketable Investment Securities
As of December 31, 2014, we held strategic and financial debt and equity investments in public companies with a
fair value of $711 million for strategic and financial purposes, which are highly speculative and have experienced
and continue to experience volatility. As of December 31, 2014, our strategic investment portfolio consisted of
securities of a small number of issuers, and as a result the value of that portfolio depends, among other things, on the
performance of those issuers. The fair value of certain of the debt and equity securities in our investment portfolio
can be adversely impacted by, among other things, the issuers’ respective performance and ability to obtain any
necessary additional financing on acceptable terms, or at all.