XM Radio 2015 Annual Report Download - page 102

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Prepaid subscription fees received from certain automakers are recorded as deferred revenue and
amortized to revenue ratably over the service period which commences upon retail sale and
activation.
We recognize revenue from the sale of advertising as the advertising is transmitted. Agency
fees are calculated based on a stated percentage applied to gross billing revenue for our
advertising inventory and are reported as a reduction of advertising revenue. We pay certain third
parties a percentage of advertising revenue. Advertising revenue is recorded gross of such revenue
share payments as we are the primary obligor in the transaction. Advertising revenue share
payments are recorded to Revenue share and royalties during the period in which the advertising is
transmitted.
Equipment revenue and royalties from the sale of satellite radios, components and accessories
are recognized upon shipment, net of discounts and rebates. Shipping and handling costs billed to
customers are recorded as revenue. Shipping and handling costs associated with shipping goods to
customers are reported as a component of Cost of equipment.
Other revenue primarily includes U.S. Music Royalty Fees which are recorded as revenue and
as a component of Revenue share and royalties expense. Fees received from subscribers for the
U.S. Music Royalty Fee are recorded as deferred revenue and amortized to revenue ratably over
the service period which coincides with the recognition of the subscriber’s subscription revenue.
We report revenues net of any tax assessed by a governmental authority that is both imposed
on, and concurrent with, a specific revenue-producing transaction between a seller and a customer
in our consolidated statements of comprehensive income.
Accounting Standards Codification 605, Revenue Recognition, provides guidance on how and
when to recognize revenues for arrangements that may involve the delivery or performance of
multiple products, services and/or rights to use assets, such as in our bundled subscription plans.
Revenue arrangements with multiple deliverables are required to be divided into separate units of
accounting if the deliverables in the arrangement meet certain criteria. Consideration must be
allocated at the inception of the arrangement to all deliverables based on their relative selling price,
which has been determined using vendor specific objective evidence of the selling price to self-pay
customers.
Revenue Share
We share a portion of our subscription revenues earned from subscribers with certain
automakers. The terms of the revenue share agreements vary with each automaker, but are
typically based upon the earned audio revenue as reported or gross billed audio revenue. Revenue
share is recorded as an expense in our consolidated statements of comprehensive income and not
as a reduction to revenue.
Programming Costs
Programming costs which are for a specified number of events are amortized on an event-by-
event basis; programming costs which are for a specified season or include programming through a
dedicated channel are amortized over the season or period on a straight-line basis. We allocate a
portion of certain programming costs which are related to sponsorship and marketing activities to
Sales and marketing expense on a straight-line basis over the term of the agreement.
Advertising Costs
Media is expensed when aired and advertising production costs are expensed as incurred.
Advertising production costs include expenses related to marketing and retention activities, including
F-11
SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars and shares in thousands, except per share amounts)