XM Radio 2008 Annual Report Download - page 65

Inventory, net, consists of the following:
2008 2007
December 31,
Raw materials ............................................... $11,648 $ 12,594
Finished goods ............................................... 38,323 34,902
Allowance for obsolescence ..................................... (25,509) (17,959)
Total inventory, net .......................................... $24,462 $ 29,537
Investments
Marketable Securities — We account for investments in marketable securities in accordance with the
provisions of SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. Marketable
securities consist of certificates of deposit, auction rate certificates and investments in debt and equity securities of
other entities. Our investment policy objectives are the preservation of capital, maintenance of liquidity to meet
operating requirements and yield maximization. Marketable securities are classified as available-for-sale securities
and carried at fair market value. Unrealized gains and losses on available-for-sale securities are included in
Accumulated other comprehensive (loss) income, net of tax, as a separate component of Stockholders’ equity
(deficit). Realized gains and losses, dividends and interest income, including amortization of the premium or
discount arising at purchase, are included in Interest and investment income. The specific-identification method is
used to determine the cost of all securities and the basis by which amounts are reclassified from Accumulated other
comprehensive (loss) income into earnings.
We received proceeds from the sale or maturity of marketable securities of $5,469, $15,031 and $229,715 for
the years ended December 31, 2008, 2007 and 2006, respectively. We recorded $914 and $0 of net unrealized losses
on marketable securities as of December 31, 2008 and 2007, respectively.
Restricted Investments — We have certificates of deposit, money market funds and interest-bearing accounts
which are restricted as to their withdrawal. We received proceeds from the release of restricted investments of
$60,400, $25,160 and $26,000 for the years ended December 31, 2008, 2007 and 2006, respectively.
Equity Method Investments — Investments in which we have the ability to exercise significant influence but
not control are accounted for pursuant to the equity method of accounting. We recognize our proportionate share of
earnings or losses of our affiliates as they occur as a component of Other (expense) income in our consolidated
statements of operations. We evaluate our equity method investments for impairment whenever events, or changes
in circumstances, indicate that the carrying amounts of such investments may not be recoverable. The difference
between the carrying value and the estimated fair values of our equity method investees is recognized as an
impairment loss when the loss is deemed to be other than temporary.
Cost Method Investments — Investments in equity securities that do not have readily determinable fair values
and in which we do not have a controlling interest or are unable to exert significant influence are recorded at cost.
We adopted the provisions of SFAS No. 157, Fair Value Measurements, on January 1, 2008 as it applies to
financial assets and liabilities. SFAS No. 157 establishes a fair value hierarchy for input into valuation techniques as
follows: i) Level 1 input — unadjusted quoted prices in active markets for identical instrument; ii) Level 2 input —
observable market data for the same or similar instrument but not Level 1; and iii) Level 3 input — unobservable
inputs developed using management’s assumptions about the inputs used for pricing the asset or liability. We use
Level 3 inputs to fair value our investments in auction rate certificates issued by student loan trusts and the 8%
convertible unsecured subordinated debentures issued by XM Canada. These investments are not material to our
consolidated results of operations or financial position.
F-15
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)