XM Radio 2011 Annual Report Download - page 110

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The transaction was accounted for as a reverse acquisition whereby Sirius Canada was deemed to be the
acquirer of CSR. As a result of the transaction, we recognized a $75,768 gain in Interest and investment income
during the year ended December 31, 2011.
Our interest in Sirius XM Canada is accounted for under the equity method. The excess of the cost of our
ownership interest in the equity of Sirius XM Canada over our share of the net assets is recognized as goodwill
and intangible assets and is included in the carrying amount of our investment. Equity method goodwill is not
amortized. We will periodically evaluate this investment to determine if there has been an other than temporary
decline below carrying value. Equity method intangible assets are amortized over their respective useful lives,
which is recorded in Interest and investment income. As of December 31, 2011, our investment balance in Sirius
XM Canada was approximately $45,061, $28,589 of which represents equity method goodwill and intangible
assets, and was recorded in Related party long-term assets.
We provide Sirius XM Canada with chip sets and other services and we are reimbursed for these costs. As
of December 31, 2011, amounts due for these costs totaled $7,404 and is reported as Related party current assets.
As of December 31, 2011, amounts due from Sirius XM Canada also included $7,280 attributable to
deferred programming costs and accrued interest, $4,780 of which is reported as Related party long-term assets.
We hold an investment in Cdn$4,000 face value of 8% convertible unsecured subordinated debentures
issued by CSR, for which the embedded conversion feature is bifurcated from the host contract. The host contract
is accounted for at fair value as an available-for-sale security with changes in fair value recorded to Accumulated
other comprehensive income (loss), net of tax. The embedded conversion feature is accounted for at fair value as
a derivative with changes in fair value recorded in earnings as Interest and investment income (loss). As of
December 31, 2011, the carrying values of the host contract and embedded derivative related to our investment in
the debentures was $3,490 and $0, respectively. As of December 31, 2010, the carrying values of the host
contract and embedded derivative related to our investment in the debentures was $3,302 and $11, respectively.
The carrying values of the host contract and embedded derivative are recorded in Related party long-term assets.
As of December 31, 2011, amounts due to Sirius XM Canada totaled $1,804 and is reported as Related party
current liabilities.
We recorded the following revenue from Sirius XM Canada as Other revenue in our consolidated statements
of operations:
For the Year Ended
December 31,
2011*
Royalty income ..................................................... $13,735
Amortization of Sirius XM Canada deferred income ........................ 1,388
Licensing fee revenue ................................................ 3,000
Advertising reimbursements ........................................... 417
Total revenue from Sirius XM Canada ................................. $18,540
* Sirius XM Canada commenced operations on June 2011.
Our share of net earnings or losses of Sirius XM Canada are recorded to Interest and investment income
(loss) in our consolidated statements of operations on a one month lag. Our share of Sirius XM Canada’s net
income was $1,081 for the year ended December 31, 2011. We recorded amortization expense of $1,556 related
to the equity method intangible assets for the year ended December 31, 2011.
F-22