Rogers 2012 Annual Report Download - page 104

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Changes in the net carrying amounts of goodwill and intangible assets are as follows:
December 31,
2011 December 31, 2012
Net book
value Acquisitions Net Additions and Disposals Amortization Current period impairment loss (b)(ii) Net book value
Goodwill $ 3,280 $ – $ 2 $ – $ (67) $ 3,215
Spectrum licences 1,875 360 (4) – – 2,231
Broadcast licences 116 – 2 – (8) 110
Brand names 200 – 1 (18) – 183
Customer relationships 232 – 1 (70) – 163
Roaming agreements 210 – – (44) – 166
Marketing agreements 12 – 1 (9) – 4
Acquired program rights 76 – 87 (64) (5) 94
$ 6,001 $ 360 $ 90 $ (205) $ (80) $ 6,166
December 31,
2010 December 31, 2011
Net book
value Acquisitions Net Additions and Disposals Amortization Current period impairment loss (b)(ii) Net book value
Goodwill $ 3,108 $ 172 $ – $ – $ – $ 3,280
Spectrum licences 1,871 4 – – – 1,875
Broadcast licences 99 17 – – – 116
Brand names 215 2 – (17) – 200
Customer relationships 61 241 – (70) – 232
Roaming agreements 254 – – (44) – 210
Marketing agreements 14 – 10 (12) – 12
Acquired program rights 77 – 56 (57) – 76
$ 5,699 $ 436 $ 66 $ (200) $ – $ 6,001
During the year ended December 31, 2012, no significant changes
were made in estimated useful lives compared to 2011.
Amortization of brand names, customer relationships, roaming
agreements, and marketing agreements amounted to $141 million in
2012 (2011 – $143 million). Amortization of these intangible assets
with finite lives is included in depreciation and amortization expense
in the consolidated statements of income.
The costs of acquired program rights are amortized to other external
purchases in operating costs in the consolidated statements of income
over the expected performances of the related programs and
amounted to $64 million in 2012 (2011 – $57 million).
During 2012, the Company acquired certain 2500 MHz spectrum from
Inukshuk Limited Partnership (“Inukshuk”), a 50% owned joint
venture, which resulted in a non-cash increase of Spectrum licenses of
$360 million (see note 14).
(b) Impairment:
(i) Goodwill and indefinite life intangible assets:
The Company tests CGUs with goodwill and indefinite life
intangible assets for impairment during 2012 and 2011 as at
October 1 of each calendar year. In assessing whether or not
there is impairment, the Company determines the recoverable
amount of a CGU based on the greater of value in use and
FVLCTS. FVLCTS is determined either by analysis of the
discounted cash flows or market approaches.
The Company estimates the discounted future cash flows for
periods of three to eight years, depending on the CGU and
valuation method for determining the recoverable amount, and
a terminal value. The future cash flows are based on the
Company’s estimates and include consideration for expected
future operating results, economic conditions and a general
outlook for the industry in which the CGU operates. The
discount rates used by the Company consider debt to equity
ratios and certain risk premiums. The terminal value is the value
attributed to the CGU’s operations beyond the projected time
period of the cash flows using a perpetuity rate based on
expected economic conditions and a general outlook for the
industry.
Under the market approach, the Company estimates the
recoverable amount of the CGU using multiples of operating
performance of comparable entities and precedent transactions
in the respective industry.
The Company has made certain assumptions for the discount
and terminal growth rates to reflect variations in expected
future cash flows. These assumptions may differ or change
quickly depending on economic conditions or other events.
Therefore, it is possible that future changes in assumptions may
negatively impact future valuations of CGUs and goodwill, which
would result in further impairment losses.
The following table gives an overview of the methods and
assumptions used to determine recoverable amounts for CGUs
with allocated goodwill or indefinite life intangible assets that
are significant to the Company:
Goodwill Spectrum licences Recoverable Method
Periods
used
(years)
Terminal
growth
rates %
Pre-tax
Discount
rates %
Wireless $ 1,146 $ 2,231 Value in use 5 0.5 8.3
Cable 1,000 – Value in use 5 1.0 9.2
(ii) Impairment losses:
During the year ended December 31, 2012, the Company
recorded an aggregate $80 million impairment charge for
various CGUs in the Media segment, consisting of $67 million in
goodwill, $8 million in broadcast licences and $5 million in
program rights. The recoverable amounts of the CGUs declined
in 2012 primarily due to the weakening of advertising revenue
in certain markets.
100 ROGERS COMMUNICATIONS INC. 2012 ANNUAL REPORT