XM Radio 2015 Annual Report Download - page 80

Off-Balance Sheet Arrangements
We do not have any significant off-balance sheet arrangements other than those disclosed in
Note 16 to our consolidated financial statements in this Annual Report that are reasonably likely to
have a material effect on our financial condition, results of operations, liquidity, capital expenditures
or capital resources.
Contractual Cash Commitments
For a discussion of our “Contractual Cash Commitments,” refer to Note 16 to our consolidated
financial statements in this Annual Report.
Related Party Transactions
For a discussion of “Related Party Transactions,” refer to Note 11 to our consolidated financial
statements this Annual Report.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with GAAP, which requires
management to make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the periods. Accounting estimates require the use of significant management
assumptions and judgments as to future events, and the effect of those events cannot be predicted
with certainty. The accounting estimates will change as new events occur, more experience is
acquired and more information is obtained. We evaluate and update our assumptions and estimates
on an ongoing basis and use outside experts to assist in that evaluation when we deem necessary.
We have identified all significant accounting policies in Note 3 to our consolidated financial
statements in this Annual Report.
Goodwill. Goodwill represents the excess of the purchase price over the estimated fair value of
net tangible and identifiable intangible assets acquired in business combinations. Our annual
impairment assessment of our single reporting unit is performed as of the fourth quarter of each
year. Assessments are performed at other times if events or circumstances indicate it is more likely
than not that the asset is impaired. Step one of the impairment assessment compares the fair value
of the entity to its carrying value and if the fair value exceeds its carrying value, goodwill is not
impaired. If the carrying value exceeds the fair value, the implied fair value of goodwill is compared
to the carrying value of goodwill; an impairment loss will be recorded for the amount the carrying
value exceeds the implied fair value. Our quantitative assessment is based on our enterprise fair
value. At the date of our annual assessment for 2015, the fair value of our single reporting unit
substantially exceeded its carrying value and therefore was not at risk of failing step one of
Accounting Standards Codification (“ASC”) 350-20, Goodwill. ASC 350-35 states that if the carrying
amount of the reporting unit is zero or negative, the second step of the impairment test shall be
performed to measure the amount of impairment loss, if any, when it is more likely than not that a
goodwill impairment exists based on adverse qualitative factors. Subsequent to our annual
assessment performed in the fourth quarter of 2015, we were not aware of any adverse qualitative
factors that would indicate any impairment to our goodwill as of December 31, 2015. No impairment
losses were recorded for goodwill during the years ended December 31, 2015, 2014 and 2013
Long-Lived and Indefinite-Lived Assets. We carry our long-lived assets at cost less
accumulated amortization and depreciation. We review our long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset is not
recoverable. At the time an impairment in the value of a long-lived asset is identified, the
impairment is measured as the amount by which the carrying amount of a long-lived asset exceeds
its fair value.
Our annual impairment assessment of indefinite-lived assets, our FCC licenses and
XM trademark, is performed as of the fourth quarter of each year and an assessment is made at
other times if events or changes in circumstances indicate that it is more likely than not that the
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