Cablevision 2011 Annual Report Download - page 51

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approach. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill
impairment test is performed to measure the amount of impairment loss, if any. The second step of the
goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the
carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds the
implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.
The implied fair value of goodwill is determined in the same manner as the amount of goodwill that
would be recognized in a business combination. For the purpose of evaluating goodwill impairment at
the annual impairment test date, the Company had three reporting units containing approximately 98% of
the Company's goodwill balance of $442,067. These reporting units are the Consumer Services (cable
television) reporting unit in the Telecommunications Services reportable segment ($401,320), the
Optimum Lightpath reporting unit in the Telecommunications Services reportable segment ($21,487), and
the Clearview Cinemas reporting unit in the Other reportable segment ($10,348).
The impairment test for identifiable indefinite-lived intangible assets consists of a comparison of the
estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible
asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The
following table sets forth the amount of identifiable indefinite-lived intangible assets reported in the
Company's consolidated balance sheet as of December 31, 2011:
Reportable Segment Unit of Accounting
Identifiable Indefinite-
Lived Intangible
Assets Balance
Telecommunications Services ........ Cable Television Franchises ............................... $1,240,228
Other ............................................... Newsday Trademarks ......................................... 45,300
Telecommunications Services and
Other ..........................................
FCC licenses and other indefinite-lived
intangibles ...................................................... 10,595
$1,296,123
For other long-lived assets, including intangible assets that are amortized, the Company evaluates assets
for recoverability when there is an indication of potential impairment. If the undiscounted cash flows
from a group of assets being evaluated is less than the carrying value of that group of assets, the fair value
of the asset group is determined and the carrying value of the asset group is written down to fair value.
In assessing the recoverability of the Company's goodwill and other long-lived assets, the Company must
make assumptions regarding estimated future cash flows and other factors to determine the fair value of
the respective assets. These estimates and assumptions could have a significant impact on whether an
impairment charge is recognized and also the magnitude of any such charge. Fair value estimates are
made at a specific point in time, based on relevant information. These estimates are subjective in nature
and involve uncertainties and matters of significant judgments and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the estimates. Estimates of fair value are
primarily determined using discounted cash flows and comparable market transactions. These valuations
are based on estimates and assumptions including projected future cash flows, discount rate,
determination of appropriate market comparables and determination of whether a premium or discount
should be applied to comparables. For the reporting units in the Telecommunications Services reportable
segment, these valuations also include assumptions for average annual revenue per customer, number of
serviceable passings, operating margin and market penetration as a percentage of serviceable passings,
among other assumptions. Further, the projected cash flow assumptions consider contractual
relationships, customer attrition, eventual development of new technologies and market competition. For
Newsday, these valuations also include assumptions for advertising and circulation revenue trends,
operating margin, market participant synergies, and market multiples for comparable companies. If these
estimates or material related assumptions change in the future, we may be required to record additional
impairment charges related to our long-lived assets.