XM Radio 2014 Annual Report Download - page 98

and historical weighted average cost of capital and liquidity factors, legal and regulatory issues and
industry and market pressures. Subsequent to our annual evaluation of the carrying value of our
long-lived assets, there were no events or circumstances that triggered the need for an impairment
evaluation.
There were no changes in the carrying value of our indefinite life intangible assets during the
years ended December 31, 2014 or 2013.
Useful Life of Broadcast/Transmission System. Our satellite system includes the costs of our
satellite construction, launch vehicles, launch insurance, capitalized interest, spare satellites,
terrestrial repeater network and satellite uplink facilities. We monitor our satellites for impairment
whenever events or changes in circumstances indicate that the carrying amount of the asset is not
recoverable.
We operate five in-orbit Sirius satellites, FM-1, FM-2, FM-3, FM-5 and FM-6. Our FM-1 and
FM-2 satellites were launched in 2000 and reached the end of their depreciable lives in 2013, but
are still in operation. We estimate that our FM-3 and FM-5 satellites launched in 2000 and 2009,
respectively, will operate effectively through the end of their depreciable lives in 2015 and 2024,
respectively. Our FM-6 satellite that was launched in 2013 is currently used as an in-orbit spare
that is planned to start full-time operation in 2015 and is expected to operate effectively through the
end of its depreciable life in 2028.
We operate four in-orbit XM satellites, XM-1, XM-3, XM-4 and XM-5. Our XM-1 satellite
reached the end of its depreciable life in 2013 and will be de-orbited in 2015. We estimate that our
XM-3 and XM-4 satellites launched in 2005 and 2006, respectively, will reach the end of their
depreciable lives in 2020 and 2021, respectively. Our XM-5 satellite was launched in 2010, is used
as an in-orbit spare and is expected to reach the end of its depreciable life in 2025.
Our satellites have been designed to last fifteen-years, which is consistent with our satellite
performance incentives. Our in-orbit satellites may experience component failures which could
adversely affect their useful life. We monitor the operating condition of our in-orbit satellites and if
events or circumstances indicate that the depreciable lives of our in-orbit satellites have changed,
we will modify the depreciable life accordingly. If we were to revise our estimates, our depreciation
expense would change.
Income Taxes. Deferred income taxes are recognized for the tax consequences related to
temporary differences between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for tax purposes, based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect taxable income. In
determining the period in which related tax benefits are realized for book purposes, excess share-
based compensation deductions included in net operating losses are realized after regular net
operating losses are exhausted; excess tax compensation benefits are recorded off-balance sheet
as a memo entry until the period the excess tax benefit is realized through a reduction of taxes
payable. Income tax expense is the sum of current income tax plus the change in deferred tax
assets and liabilities.
We assess the recoverability of deferred tax assets at each reporting date and where
applicable a valuation allowance is recognized when, based on the weight of all available evidence,
it is considered more likely than not that all, or some portion, of the deferred tax assets will not be
realized. Our assessment includes an analysis of whether deferred tax assets will be realized in the
ordinary course of operations based on the available positive and negative evidence, including the
scheduling of deferred tax liabilities and forecasted income from operations. The underlying
assumptions we use in forecasting future taxable income require significant judgment. In the event
that actual income from operations differs from forecasted amounts, or if we change our estimates
of forecasted income from operations, we could record additional charges or reduce allowances in
order to adjust the carrying value of deferred tax assets to their realizable amount. Such
adjustments could be material to our consolidated financial statements.
As of December 31, 2014, we had a valuation allowance of $4,995 relating to deferred tax
assets that are not likely to be realized due to certain state net operating loss limitations.
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