Annual report pursuant to Section 13 and 15(d)

Intangible Assets

v2.4.0.6
Intangible Assets
 12 Months Ended
Dec. 31, 2012
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible Assets
Intangible Assets

Intangible assets consist of the following:
 
 
 
December 31, 2012
 
December 31, 2011
 
Weighted Average
Useful Lives
 
Gross
Carrying
Value
 
Accumulated
Amortization
 
Net Carrying
Value
 
Gross
Carrying
Value
 
Accumulated
Amortization
 
Net Carrying
Value
Indefinite life intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
FCC licenses
Indefinite
 
$
2,083,654

 
$
—

 
$
2,083,654

 
$
2,083,654

  
$
—

 
$
2,083,654

Trademark
Indefinite
 
250,000

 
—

 
250,000

 
250,000

  
—

 
250,000

Definite life intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Subscriber relationships
9 years
 
380,000

 
(233,317
)
 
146,683

 
380,000

  
(191,201
)
 
188,799

Licensing agreements
9.1 years
 
78,489

 
(44,161
)
 
34,328

 
78,897

  
(34,145
)
 
44,752

Proprietary software
6 years
 
16,552

 
(12,777
)
 
3,775

 
16,552

  
(11,507
)
 
5,045

Developed technology
10 years
 
2,000

 
(883
)
 
1,117

 
2,000

  
(683
)
 
1,317

Leasehold interests
7.4 years
 
132

 
(79
)
 
53

 
132

  
(61
)
 
71

Total intangible assets
 
 
$
2,810,827

 
$
(291,217
)
 
$
2,519,610

 
$
2,811,235

  
$
(237,597
)
 
$
2,573,638



Indefinite Life Intangible Assets
We have identified our FCC licenses and the XM trademark as indefinite life intangible assets after considering the expected use of the assets, the regulatory and economic environment within which they are used and the effects of obsolescence on their use.

We hold FCC licenses to operate our satellite digital audio radio service and provide ancillary services. The following table outlines the years in which each of our licenses expires:
FCC satellite licenses
 
Expiration year
SIRIUS FM-1
 
2017
SIRIUS FM-2
 
2017
SIRIUS FM-3
 
2017
SIRIUS FM-5
 
2017
SIRIUS FM-6 (1)
 

XM-1
 
2014
XM-2
 
2014
XM-3
 
2013
XM-4
 
2014
XM-5
 
2018

(1)
We hold an FCC license for our FM-6 satellite, which will expire eight years from when this satellite is launched and placed into operation.

Prior to expiration, we are required to apply for a renewal of our FCC licenses. The renewal and extension of our licenses is reasonably certain at minimal cost, which is expensed as incurred. Each of the FCC licenses authorizes us to use the broadcast spectrum, which is a renewable, reusable resource that does not deplete or exhaust over time.

In connection with the Merger, $250,000 of the purchase price was allocated to the XM trademark. As of December 31, 2012, there were no legal, regulatory or contractual limitations associated with the XM trademark.

Our annual impairment assessment of our indefinite intangible assets is performed as of the fourth quarter of each year. 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. At the date of our annual assessment for 2012, our qualitative impairment assessment of fair value of our indefinite intangible assets indicated that such assets substantially exceeded their carrying value and therefore was not at risk of impairment. In 2011, we utilized independent appraisals to assist in determining the fair value of our indefinite intangible assets.

As of December 31, 2012, there were no indicators of impairment and no impairment loss was recorded for indefinite intangible assets during the years ended December 31, 2012, 2011 and 2010.

Definite Life Intangible Assets
Subscriber relationships are amortized on an accelerated basis over 9 years, which reflects the estimated pattern in which the economic benefits will be consumed. Other definite life intangible assets include certain licensing agreements, which are amortized over a weighted average useful life of 9.1 years on a straight-line basis.

Amortization expense for all definite life intangible assets was $53,620, $59,050 and $66,324 for the years ended December 31, 2012, 2011 and 2010, respectively. Expected amortization expense for each of the fiscal years 2013 through 2017 and for periods thereafter is as follows:
Year ending December 31,
  
Amount
2013
  
$
47,330

2014
  
38,852

2015
  
37,526

2016
  
31,932

2017
  
18,968

Thereafter
  
11,348

Total definite life intangible assets, net
  
$
185,956