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Summary of Significant Accounting Policies (Policies)
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6 Months Ended |
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Jun. 30, 2011
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| Summary of Significant Accounting Policies [Abstract] | |
| Principles of Consolidation |
Principles of Consolidation
The accompanying unaudited consolidated financial statements of Sirius XM Radio Inc. and
subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles
(“GAAP”), the instructions to Form 10-Q and Article 10 of Regulation S-X of the United States
Securities and Exchange Commission (“SEC”) for interim financial reporting. Accordingly, these
interim financial statements do not include all of the information and footnotes required by GAAP
for complete financial statements. All significant intercompany transactions have been eliminated
in consolidation.
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| Basis of Presentation |
Basis of Presentation
In the opinion of management, all normal recurring adjustments necessary for the fair
presentation of our unaudited consolidated financial statements as of June 30, 2011 and for the
three and six months ended June 30, 2011 and 2010 have been made.
Interim results are not necessarily indicative of the results that may be expected for a full
year. This Quarterly Report on Form 10-Q should be read together with our Annual Report on Form
10-K for the year ended December 31, 2010, which was filed with the SEC on February 16, 2011.
We have evaluated events subsequent to the balance sheet date and prior to the filing of this
Quarterly Report on Form 10-Q for the three and six months ended June 30, 2011 and have determined
that no events have occurred that would require adjustment to our unaudited consolidated financial
statements.
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| Use of Estimates |
Use of Estimates
In presenting unaudited consolidated financial statements, management makes estimates and
assumptions that affect the reported amounts and accompanying notes. Estimates, by their nature,
are based on judgment and available information at this time. Actual results could differ
materially from those estimates.
Significant estimates inherent in the preparation of the accompanying unaudited consolidated
financial statements include revenue recognition, asset impairment, useful 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.
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| Recent Accounting Pronouncements |
Recent Accounting Pronouncements
In May 2011, the FASB issued Accounting Standards Update No. 2011-04, Amendments to Achieve
Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial
Reporting Standards (Topic 820) — Fair Value Measurement (ASU 2011-04), to provide a consistent
definition of fair value and ensure that the fair value measurement and disclosure requirements are
similar between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 changes
certain fair value measurement principles and enhances the disclosure requirements particularly for
level 3 fair value measurements. The amendments are not expected to have a significant impact on
companies that apply U.S. GAAP. This standard is effective for interim and annual periods
beginning after December 15, 2011 and will be applied prospectively. We are currently evaluating
the impact of our pending adoption of ASU 2011-04 on our consolidated financial statements.
In June 2011, the FASB issued Accounting Standards Update No. 2011-05, Comprehensive Income
(Topic 220) — Presentation of Comprehensive Income (ASU 2011-05), to require an entity to present
the total of comprehensive income, the components of net income, and the components of other
comprehensive income either in a single continuous statement of comprehensive income or in two
separate but consecutive statements. ASU 2011-05 eliminates the option to present the components of
other comprehensive income as part of the statement of equity. The standard does not change the
items which must be reported in other comprehensive income, how such items are measured or when
they must be reclassified to net income. This standard is effective for interim and annual periods
beginning after December 15, 2011 and will be applied retrospectively. ASU 2011-05 affects
financial statement presentation only and will have no impact on our results of operations.
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| Earnings per Share |
Earnings per Share (“EPS”)
Basic net income per common share is calculated using the weighted average common shares
outstanding during each reporting period. Diluted net income per common share adjusts the weighted
average common shares outstanding for the potential dilution that could occur if common stock
equivalents (convertible debt and preferred stock, warrants, stock options, restricted stock and
restricted stock units) were exercised or converted into common stock, calculated using the
treasury stock method. Common stock equivalents of approximately 96,155,764 and 686,407,346 for the
three months ended June 30, 2011 and 2010, respectively, and 109,334,669 and 692,011,065 for the
six months ended June 30, 2011 and 2010, respectively, were excluded from the calculation of
diluted net income per common share as the effect would have been anti-dilutive.
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| Accounts Receivable |
Accounts Receivable
Accounts receivable, net, is stated at amounts due from customers net of an allowance for
doubtful accounts. Our allowance for doubtful accounts considers historical experience, the age of
amounts due, current economic conditions and other factors that may affect the counterparty’s
ability to pay.
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| Inventory |
Inventory
Inventory consists of finished goods, refurbished goods, chip sets and other raw material
components used in manufacturing radios. Inventory is stated at the lower of cost, determined on a
first-in, first-out or market basis. We record an estimated allowance for inventory that is
considered slow moving, 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
unaudited consolidated statements of operations. The provision related to inventory consumed in our
OEM and retail distribution channel is reported as a component of Subscriber acquisition costs in
our unaudited consolidated statements of operations.
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| Fair Value of Financial Instruments |
Fair Value of Financial Instruments
The fair value of a financial instrument is the amount at which the instrument could be
exchanged in an orderly transaction between market participants to sell the asset or transfer the
liability. As of June 30, 2011 and December 31, 2010, the carrying amounts of cash and cash
equivalents, accounts and other receivables, and accounts payable approximated fair value due to
the short-term nature of these instruments.
The fair value for publicly traded instruments is determined using quoted market prices while
the fair value for non-publicly traded instruments is based upon estimates from a market maker and
brokerage firm. As of June 30, 2011 and December 31, 2010, the carrying value of our debt was
$3,024,960 and $3,217,578, respectively; and the fair value approximated $3,488,874 and $3,722,905,
respectively.
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| Reclassifications |
Reclassifications
Certain amounts in our prior period consolidated financial statements have been reclassified
to conform to our current period presentation.
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| ASC 605 Revenue Recognition |
In 2005, XM entered into agreements to provide XM Canada with the right to offer XM satellite
radio service in Canada. The agreements have an initial ten year term and XM Canada has the
unilateral option to extend the agreements for an additional five year term. We receive a 15%
royalty for all subscriber fees earned by XM Canada each month for its basic service and an
activation fee for each gross activation of an XM Canada subscriber on XM’s system. Sirius XM
Canada is obligated to pay us a total of $70,300 for the rights to broadcast and market National
Hockey League (“NHL”) games for a ten year term. We recognize these payments on a gross basis as a
principal obligor pursuant to the provisions of ASC 605, Revenue Recognition. The estimated fair
value of deferred revenue from XM Canada as of the Merger date was approximately $34,000, which is
amortized on a straight-line basis through 2020, the end of the expected term of the agreements. As
of June 30, 2011 and December 31, 2010, the carrying value of deferred revenue related to this
agreement was $27,405 and $28,792, respectively.
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