XM Radio 2008 Annual Report Download - page 64

FIN No. 48 requires a company to first determine whether it is more-likely-than-not (defined as a likelihood of
more than fifty percent) that a tax position will be sustained based on its technical merits as of the reporting date,
assuming that taxing authorities will examine the position and have full knowledge of all relevant information. A tax
position that meets this more-likely-than-not threshold is then measured and recognized at the largest amount of
benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority.
Net (Loss) Income per Common Share
We compute net (loss) income per common share in accordance with SFAS No. 128, Earnings Per Share. Basic
net (loss) income per common share is calculated using the weighted average common shares outstanding during
each reporting period. Diluted net (loss) income per common share adjusts the weighted average common shares
outstanding for the potential dilution that could occur if common stock equivalents (convertible debt and preferred
stock, warrants, stock options and restricted stock shares and units) were exercised or converted into common stock.
Common stock equivalents of approximately 787,000,000, 165,000,000 and 194,000,000 for the years ended
December 31, 2008, 2007 and 2006, respectively, were not included in the calculation of diluted net loss per
common share as the effect would have been anti-dilutive.
Comprehensive (Loss) Income
We report comprehensive (loss) income in accordance with SFAS No. 130, Reporting Comprehensive Income,
which established the standard for reporting and displaying other comprehensive (loss) income and its components
within financial statements.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, money market funds, certificates of deposit and investments
with an original maturity of three months or less when purchased. Cash and cash equivalents are stated at fair market
value.
Accounts Receivable
Accounts receivable are stated at amounts due from customers net of an allowance for doubtful accounts. We
specifically reserve for customers with known disputes or collectability issues. The remaining reserve recorded in
the allowance for doubtful accounts is our best estimate of the amount of probable losses in our existing accounts
receivable based on our actual write-off experience. All accounts receivable balances greater than approximately
30 days past the due date are considered delinquent. Delinquent accounts are written off after approximately
30 days.
Receivables from Distributors
Receivables from distributors are amounts due from OEMs and others for prepaid subscriptions.
Inventory
Inventory consists of finished goods, refurbished goods, chip sets and other raw material components used in
manufacturing radios. Inventory is stated at the lower of cost, determined on a first-in, first-out basis, or market. We
record an estimated allowance for inventory that is considered slow moving and obsolete or whose carrying value is
in excess of net realizable value. The provision related to products purchased for our direct to consumer distribution
channel is reported as a component of Cost of equipment in our consolidated statements of operations. The
remaining provision is reported as a component of Subscriber acquisition costs in our consolidated statements of
operations.
F-14
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)