Rogers 2015 Annual Report Download - page 109

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USE OF ESTIMATES AND JUDGMENTS
ESTIMATES
We use estimates in determining the recoverable amount of
intangible assets and goodwill.
The determination of the recoverable amount for the purpose of
impairment testing requires the use of significant estimates, such
as:
• future cash flows;
• terminal growth rates; and
• discount rates.
We estimate value in use for impairment tests by discounting
estimated future cash flows to their present value. We estimate the
discounted future cash flows for periods of up to five years,
depending on the CGU, and a terminal value. The future cash flows
are based on our estimates and expected future operating results
of the CGU after considering economic conditions and a general
outlook for the CGU’s industry. Our discount rates consider market
rates of return, debt to equity ratios and certain risk premiums,
among other things. 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.
We determine fair value less costs to sell in one of the following two
ways:
• Analyzing discounted cash flows – we estimate the discounted
future cash flows for periods of five to ten years, depending on
the CGU, and a terminal value, similar to the value in use
methodology described above, while applying assumptions
consistent with those a market participant would make. Future
cash flows are based on our estimates of expected future
operating results of the CGU. Our estimates of future cash flows,
terminal values and discount rates consider similar factors to
those described above for value in use estimates.
• Usingamarketapproach–weestimatetherecoverableamount
of the CGU using multiples of operating performance of
comparable entities and precedent transactions in that industry.
We make 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. It is therefore possible that future
changes in assumptions may negatively affect future valuations of
CGUs and goodwill, which could result in impairment losses.
If our estimate of the asset’s or CGU’s recoverable amount is less
than its carrying amount, we reduce its carrying amount to the
recoverable amount and recognize the loss in net income
immediately.
JUDGMENTS
We make significant judgments that affect the measurement of our
intangible assets and goodwill.
Judgment is applied when deciding to designate our spectrum
and broadcast licences as assets with indefinite useful lives since we
believe the licences are likely to be renewed for the foreseeable
future such that there is no limit to the period that these assets are
expected to generate net cash inflows. We make judgments to
determine that these assets have indefinite lives, analyzing all
relevant factors, including the expected usage of the asset, the
typical life cycle of the asset, and anticipated changes in the market
demand for the products and services the asset helps generate.
After review of the competitive, legal, regulatory, and other factors,
it is our view that these factors do not limit the useful lives of our
spectrum and broadcast licences.
Judgment is also applied in choosing methods for amortizing our
intangible assets and program rights that we believe most
accurately represent the consumption of those assets and are most
representative of the economic substance of the intended use of
the underlying assets.
Finally, we make judgments in determining CGUs and the
allocation of goodwill to CGUs or groups of CGUs for the purpose
of impairment testing.
EXPLANATORY INFORMATION
(In millions of dollars) December 31, 2015 December 31, 2014 December 31, 2013
Cost prior to
impairment
losses
Accumulated
amortization
Accumulated
impairment
losses
Net
carrying
amount
Cost prior to
impairment
losses
Accumulated
amortization
Accumulated
impairment
losses
Net
carrying
amount
Cost prior to
impairment
losses
Accumulated
amortization
Accumulated
impairment
losses
Net
carrying
amount
Indefinite-life intangible assets:
Spectrum licences 6,416 – – 6,416 5,576 – – 5,576 2,275 – – 2,275
Broadcast licences 324 – (99) 225 324 – (99) 225 324 – (99) 225
Finite-life intangible assets:
Brand names 420 (270) (14) 136 420 (255) (14) 151 438 (257) (14) 167
Customer relationships 1,609 (1,414) – 195 1,620 (1,339) – 281 1,543 (1,234) – 309
Roaming agreements 523 (488) – 35 523 (444) – 79 523 (400) – 123
Marketing agreements 10 (10) – –10 (10) – – 9 (8) – 1
Acquired program rights 332 (91) (5) 236 343 (62) (5) 276 168 (52) (5) 111
Total intangible assets 9,634 (2,273) (118) 7,243 8,816 (2,110) (118) 6,588 5,280 (1,951) (118) 3,211
Goodwill 4,112 – (221) 3,891 4,104 – (221) 3,883 3,972 – (221) 3,751
Total intangible assets and
goodwill 13,746 (2,273) (339) 11,134 12,920 (2,110) (339) 10,471 9,252 (1,951) (339) 6,962
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 107