Comcast 2015 Annual Report Download - page 71

For the purpose of our impairment testing, we have grouped the recorded values of our various cable fran-
chise rights into our three Cable Communications divisions or units of account. We evaluate the unit of
account periodically to ensure our impairment testing is performed at an appropriate level.
The annual impairment test for indefinite-lived intangibles allows for the option to first assess qualitative fac-
tors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible is less
than its carrying amount. An entity may choose to perform the qualitative assessment or an entity may
bypass the qualitative assessment and proceed directly to the quantitative impairment test. If it is determined,
on the basis of qualitative factors, that the fair value of the indefinite-lived intangible is, more likely than not,
less than its carrying value, the quantitative impairment test is required. When performing a quantitative
assessment, we estimate the fair value of our cable franchise rights primarily based on a discounted cash
flow analysis that involves significant judgment. When analyzing the fair values indicated under the discounted
cash flow models, we also consider multiples of operating income before depreciation and amortization gen-
erated by the underlying assets, current market transactions and profitability information.
In 2015, we performed a qualitative assessment of our cable franchise rights. We considered various factors
that would affect the estimated fair values of our cable franchise rights, including changes in our projected
future cash flows associated with our Cable Communications segment; market transactions and macro-
economic conditions; and also the 8% increase in our market capitalization since we performed our 2014
quantitative assessment. In addition, we considered the results of our 2014 quantitative assessment, in which
the estimated fair values of our franchise rights exceeded the carrying value in our three Cable Communica-
tions Divisions by 26%, 42% and 50%, respectively. We also compared our weighted-average cost of capital
in 2015 to that used in our 2014 quantitative assessment and it had remained relatively consistent. Based on
our 2015 qualitative assessment, we concluded that it was more likely than not that the estimated fair values
of our franchise rights were higher than our carrying values and that the performance of a quantitative
impairment test was not required.
Since the adoption of the accounting guidance related to goodwill and intangible assets in 2002, we have not
recorded any significant impairment charges to cable franchise rights as a result of our impairment testing. A
future change in the unit of account could result in the recognition of an impairment charge.
We could also record impairment charges in the future if there are changes in long-term market conditions, in
expected future operating results, or in federal or state regulations that prevent us from recovering the carry-
ing value of these cable franchise rights. Assumptions made about increased competition and economic
conditions could also impact the results of any qualitative assessment and the valuations used in future
annual quantitative impairment testing and result in a reduction in the fair values of our cable franchise rights.
Film and Television Costs
We capitalize film and television production costs, including direct costs, production overhead, print costs, devel-
opment costs and interest. We amortize capitalized film and television production costs, including acquired
libraries, and accrue costs associated with participation and residual payments to programming and production
expenses. We generally record the amortization and the accrued costs using the individual film forecast compu-
tation method, which amortizes such costs using the ratio of the current period’s revenue to estimated total
remaining gross revenue from all sources (“ultimate revenue”). Estimates of ultimate revenue have a significant
impact on how quickly capitalized costs are amortized and, therefore, are updated regularly.
Our estimates of ultimate revenue for films generally include revenue from all sources that are expected to be
earned within 10 years from the date of a film’s initial release. These estimates are based on the historical
performance of similar content, as well as factors unique to the content itself. The most sensitive factor affect-
ing our estimate of ultimate revenue for a film intended for theatrical release is the film’s theatrical
Comcast 2015 Annual Report on Form 10-K 68