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SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Significant estimates inherent in the preparation of the accompanying consolidated financial statements
include revenue recognition, asset impairment, depreciable lives of our satellites, share-based payment expense,
and valuation allowances against deferred tax assets. Economic conditions in the United States could have a
material impact on our accounting estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, money market funds, in-transit credit card receipts and
highly liquid investments with an original maturity of three months or less when purchased.
Equity Method Investments
We hold an equity method investment in Sirius XM Canada. 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
income (expense) in our consolidated statements of operations.
The difference between our investment and our share of the fair value of the underlying net assets of our
affiliates is first allocated to either finite-lived intangibles or indefinite-lived intangibles and the balance is
attributed to goodwill. We follow ASC 350, Intangibles — Goodwill and Other (“ASC 350”), which requires that
equity method finite-lived intangibles be amortized over their estimated useful life while indefinite-lived
intangibles and goodwill are not amortized. The amortization of equity method finite-lived intangible assets is
recorded in Interest and investment income in our consolidated statements of operations. We periodically
evaluate our equity method investments to determine if there has been an other than temporary decline below
carrying value. Equity method finite-lived intangibles, indefinite-lived intangibles and goodwill are included in
the carrying amount of the investment.
Property and Equipment
Property and equipment, including satellites, are stated at cost less accumulated depreciation and
amortization. Equipment under capital leases is stated at the present value of minimum lease payments.
Depreciation and amortization are calculated using the straight-line method over the following estimated
depreciable lives:
Satellite system ............................ 2-15years
Terrestrial repeater network ................... 5-15years
Broadcast studio equipment ................... 3-15years
Capitalized software and hardware ............. 3-7years
Satellite telemetry, tracking and control
facilities ................................ 3-15years
Furniture, fixtures, equipment and other ......... 2-7years
Building .................................. 20or30years
Leasehold improvements ..................... Lesser of useful life or remaining lease term
We review long-lived assets, such as property and equipment, and purchased intangibles subject to
amortization for impairment whenever events or changes in circumstances indicate the carrying amount may not
be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount
of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying
amount of an asset exceeds the estimated future cash flows, an impairment charge is recognized for the amount
by which the carrying amount exceeds the fair value of the asset.
F-9