Dish Network 2002 Annual Report Download - page 79

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ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-19
network as a component of “Other subscriber promotion subsidies”. No proceeds from the sale of subscriber related
equipment is recognized as revenue. Accordingly, subscriber acquisition costs are generally expensed as incurred
except for under EchoStar’s Digital Home Plan which was initiated during 2000 wherein the Company retains title to the
receiver and certain other equipment resulting in the capitalization and depreciation of such equipment cost over its
estimated useful life.
Research and Development Costs
Research and development costs are expensed as incurred. Research and development costs totaled
$17 million, $19 million and $33 million for the years ended December 31, 2000, 2001 and 2002, respectively.
Accounting for Stock-Based Compensation
EchoStar has elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to
Employees,” (“APB 25”) and related interpretations in accounting for its stock-based compensation plans, which are
described more fully in Note 7. Under APB 25, EchoStar generally does not recognize compensation expense on the
issuance of stock under its Stock Incentive Plan because the option terms are typically fixed and typically the exercise
price equals or exceeds the market price of the underlying stock on the date of grant. In October 1995, the Financial
Accounting Standards Board issued Financial Accounting Standard No. 123, “Accounting and Disclosure of Stock-
Based Compensation,” (“FAS No. 123”) which established an alternative method of expense recognition for stock-based
compensation awards to employees based on fair values. EchoStar elected to not adopt FAS No. 123 for expense
recognition purposes.
Pro forma information regarding net income and earnings per share is required by FAS No. 123 and has been
determined as if EchoStar had accounted for its stock-based compensation plans using the fair value method prescribed
by that statement. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense
over the options’ vesting period. All options are initially assumed to vest. Compensation previously recognized is
reversed to the extent applicable to forfeitures of unvested options. The following table illustrates the effect on net loss
and loss per share if EchoStar had accounted for its stock-based compensation plans using the fair value method
prescribed by FAS 123 (in thousands, except per share amounts):
Year Ended December 31,
2000 2001 2002
Net loss, as reported.................................................................... $ (650,326) $ (215,498) $ (881,650)
Add: Stock-based employee compensation expense included in
reported net income, net of related tax effects................ 51,465 20,173 11,279
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all
awards, net of related tax effects..................................... (22,918) (28,566) (27,081)
Pro forma net loss....................................................................... $ (621,779) $ (223,891) $ (897,452)
Basic and diluted loss per share, as reported.............................. $ (1.38) $ (0.45) $ (0.92)
Pro forma basic and diluted loss per share................................. $ (1.32) $ (0.47) $ (0.96)