Dish Network 2015 Annual Report Download - page 122

DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-18
x “Other subscriber acquisition costs” includes net costs related to promotional incentives and costs related
to installation and other promotional subsidies for our DISH branded pay-TV service as well as our direct
sales efforts and commissions for our Sling branded pay-TV services.
x “Subscriber acquisition advertising” includes advertising and marketing expenses related to the acquisition
of new Pay-TV and Broadband subscribers. Advertising costs are expensed as incurred.
We characterize amounts paid to our independent retailers 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 acquisition costs.” Our payments for equipment buydowns represent a
partial or complete return of the independent retailer’s purchase price and are, therefore, netted against the proceeds
received from the independent retailer. We report the net cost from our various sales promotions through our
independent retailer network as a component of “Other subscriber acquisition costs.”
Derivative Financial Instruments
We may purchase and hold derivative financial instruments for, among other reasons, strategic or speculative
purposes. We record all derivative financial instruments on our Consolidated Balance Sheets at fair value as either
assets or liabilities. Changes in the fair values of derivative financial instruments are recognized in our results of
operations and included in “Other, net” within “Other Income (Expense)” on our Consolidated Statements of
Operations and Comprehensive Income (Loss). We currently have not designated any derivative financial
instrument for hedge accounting.
As of December 31, 2015 and 2014, we held derivative financial instruments indexed to the trading price of
common equity securities with a fair value of $557 million and $383 million, respectively. The fair value of the
derivative financial instruments is dependent on the trading price of the indexed common equity securities, which
may be volatile and vary depending on, among other things, the issuer’s financial and operational performance and
market conditions.
Equipment Lease Programs
DISH branded pay-TV subscribers have the choice of leasing or purchasing the satellite receiver and other
equipment necessary to receive our DISH branded pay-TV service. Most of our new DISH branded pay-TV
subscribers choose to lease equipment and thus we retain title to such equipment. New Broadband subscribers lease
the modem and other equipment necessary to receive broadband services. Equipment leased to new and existing
DISH branded pay-TV and Broadband subscribers is capitalized and depreciated over their estimated useful lives.
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 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. The new standard could impact
revenue and cost recognition for a significant number of our contracts, as well as our business processes and
information technology systems. As a result, our evaluation of the effect of the new standard will likely extend over
several future periods. On July 9, 2015, the FASB approved a one year deferral on the effective date for
implementation of this standard, which changed the effective date for us to January
1, 2018.