XM Radio 2014 Annual Report Download - page 122

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may affect the counterparty’s ability to pay. Bad debt expense is included in Customer service and
billing expense in our consolidated statements of comprehensive income.
Receivables from distributors primarily include billed and unbilled amounts due from OEMs for
services included in the sale or lease price of vehicles, as well as billed amounts due from
wholesale distributors of our satellite radios. Other receivables primarily include amounts due from
manufacturers of our radios, modules and chipsets where we are entitled to a subsidy based on the
number of units produced. We have not established an allowance for doubtful accounts for our
receivables from distributors or other receivables as we have historically not experienced any
significant collection issues with OEMs or other third parties.
Receivables, net consists of the following:
December 31,
2014
December 31,
2013
Gross customer accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $101,634 $ 95,562
Allowance for doubtful accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,815) (9,078)
Customer accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 93,819 $ 86,484
Receivables from distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,731 88,975
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,029 17,453
Total Receivables, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $220,579 $192,912
(7) Inventory, net
Inventory consists of finished goods, refurbished goods, chipsets and other raw material
components used in manufacturing radios. Inventory is stated at the lower of cost or market. We
record an estimated allowance for inventory that is considered slow moving or obsolete or whose
carrying value is in excess of net realizable value. The provision related to products purchased for
resale in our direct to consumer distribution channel and components held for resale by us is
reported as a component of Cost of equipment in our consolidated statements of comprehensive
income. The provision related to inventory consumed in our OEM and retail distribution channel is
reported as a component of Subscriber acquisition costs in our consolidated statements of
comprehensive income.
Inventory, net, consists of the following:
December 31,
2014
December 31,
2013
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,150 $ 12,358
Finished goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,971 15,723
Allowance for obsolescence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,724) (14,218)
Total inventory, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,397 $ 13,863
(8) Goodwill
Goodwill represents the excess of the purchase price over the estimated fair value of the 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, and an
assessment is performed at other times if an event occurs or circumstances change that would more
likely than not reduce the fair value of the asset below its carrying value. Step one of the impairment
assessment compares the fair value 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. If the implied fair value exceeds the carrying
F-16
SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollar amounts in thousands, unless otherwise stated)