Rogers 2008 Annual Report Download - page 96

92 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Q) IMPAIRMENT OF LONG-LIVED ASSETS:
The Company reviews long-lived assets, which include PP&E and
intangible assets with finite useful lives, for impairment annually
or more frequently if events or changes in circumstances indicate
that the carrying amount may not be recoverable. If the sum of
the undiscounted future cash flows expected to result from the
use and eventual disposition of a group of assets is less than its
carrying amount, it is considered to be impaired. An impairment
loss is measured as the amount by which the carrying amount of
the group of assets exceeds its fair value.
The Company tested long-lived assets with finite useful lives
for impairment during 2008 and recorded a write-down of
$51 million related to the Citytv CRTC commitments asset (note 13)
and $14 million related to the Citytv brand name (note 11(a)(ii)). No
impairment was recorded in 2007.
(R) ASSET RETIREMENT OBLIGATIONS:
Asset retirement obligations are legal obligations associated with
the retirement of PP&E that result from their acquisition, lease,
construction, development or normal operations. The Company
records the estimated fair value of a liability for an asset retirement
obligation in the year in which it is incurred and when a reasonable
estimate of fair value can be made. The fair value of a liability for
an asset retirement obligation is the amount at which that liability
could be settled in a current transaction between willing parties,
that is, other than in a forced or liquidation transaction and, in the
absence of observable market transactions, is determined as the
present value of expected cash flows. The Company subsequently
allocates the asset retirement cost to expense using a systematic
and rational method over the asset’s useful life, and records the
accretion of the liability as a charge to operating expenses.
(S) USE OF ESTIMATES:
The preparation of financial statements requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the years. Actual results
could differ from those estimates.
Key areas of estimation, where management has made difficult,
complex or subjective judgments, often as a result of matters
that are inherently uncertain, include the allowance for doubtful
accounts and certain accrued liabilities, the ability to use income
tax loss carryforwards and other future income tax assets and
liabilities, capitalization of internal labour and overhead, useful
lives of depreciable assets and intangible assets with finite useful
lives, discount rates and expected returns on plan assets affecting
pension expense and the deferred pension asset, estimation of
credit spreads for determination of the fair value of derivative
instruments and the recoverability of long-lived assets, goodwill
and intangible assets, which require estimates of future cash
flows and discount rates. For business combinations, key areas of
estimation and judgment include the allocation of the purchase
price and related integration and severance costs.
(P) GOODWILL AND INTANGIBLE ASSETS:
(i) Goodwill:
Goodwill is the residual amount that results when the purchase
price of an acquired business exceeds the sum of the amounts
allocated to the tangible and intangible assets acquired,
less liabilities assumed, based on their fair values. When the
Company enters into a business combination, the purchase
method of accounting is used. Goodwill is assigned, as of the
date of the business combination, to reporting units that are
expected to benefit from the business combination.
Goodwill is not amortized but instead is tested for impairment
annually or more frequently if events or changes in
circumstances indicate that the asset might be impaired. The
impairment test is carried out in two steps. In the first step,
the carrying amount of the reporting unit, including goodwill,
is compared with its fair value. When the fair value of the
reporting unit exceeds its carrying amount, goodwill of the
reporting unit is not considered to be impaired and the second
step of the impairment test is unnecessary. The second step
is carried out when the carrying amount of a reporting unit
exceeds its fair value, in which case, the implied fair value
of the reporting unit’s goodwill, determined in the same
manner as the value of goodwill is determined in a business
combination, is compared with its carrying amount to measure
the amount of the impairment loss, if any.
(ii) Intangible assets:
Intangible assets acquired in a business combination are
recorded at their fair values. Intangible assets with finite
useful lives are amortized over their estimated useful lives and
are tested for impairment, as described in note 2(q). Intangible
assets having an indefinite life, being spectrum and broadcast
licences, are not amortized but are tested for impairment on
an annual or more frequent basis by comparing their fair value
to their carrying amount. An impairment loss on an indefinite
life intangible asset is recognized when the carrying amount
of the asset exceeds its fair value.
Intangible assets with finite useful lives are amortized on a
straight-line basis over their estimated useful lives as follows:
Brand name – Rogers 20 years
Brand name – Fido 5 years
Brand name – Citytv 5 years
Subscriber bases 2¼ to 4²⁄ ³ years
Roaming agreements 12 years
Dealer networks 4 years
Marketing agreement 5 years
The Company tested goodwill and intangible assets with indefinite
lives for impairment during 2008 and recorded a writedown of
$154 million related to the goodwill of the conventional television
reporting unit and $75 million related to the Citytv broadcast
licence (note 11(a)). No impairment of goodwill and intangible
assets with indefinite lives was recorded in 2007.