Shaw 2009 Annual Report Download - page 28

intangible assets acquired consist of amounts allocated to broadcast rights which represent
identifiable assets with indefinite useful lives.
Broadcast rights are comprised of broadcast authorities including licenses and exemptions from
licensing that allow access to homes and subscribers in a specific area that are identified on a
business combination with respect to the acquisition of shares or assets of a broadcast distribution
undertaking.
The Company has concluded that the broadcast rights have indefinite useful lives since there are no
legal, regulatory, contractual, economic or other factors that would prevent the Company’s license
renewals or limit the period over which these rights will contribute to the Company’s cash flows.
Goodwill and broadcast rights are not amortized but assessed for impairment on an annual basis in
accordance with CICA Handbook Section 3062 “Impairment of Long-lived assets” and FAS No. 142
“Goodwill and Other Intangible Assets”. The Company periodically evaluates the unit of account
used to test for impairment of the broadcast rights to ensure testing is performed at the appropriate
level. The Company has identified two reporting units that have remained unchanged for a period
exceeding 5 years:
kCable systems
kDTH and satellite services
vii) Asset Impairment
Goodwill impairment is determined using a two-step process. The first step involves a comparison of
the estimated fair value of the reporting unit to its carrying amount, including goodwill. If the fair
value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not
impaired, thus the second step of the impairment test is unnecessary. If the carrying amount of the
reporting unit exceeds its fair value, the second step of the impairment test is performed to measure
the amount of the impairment loss.
The impairment test for other intangible assets not subject to amortization involves a comparison of the
estimated fair value of the intangible asset with its carrying value. The Company estimates the fair value
of intangible assets not subject to amortization using a discounted cash flow (“DCF”) analysis.
Significant judgements are inherent in this analysis including estimating the amount and timing of
the cash flows attributable to the broadcast rights, the selection of an appropriate discount rate, and the
identification of appropriate terminal growth rate assumptions. In this analysis the Company estimates
the discrete future cash flows associated with the intangible asset for 5 years and determines a terminal
value. The future cash flows are based on the Company’s estimates of future operating results,
economic conditions and the competitive environment. The terminal value is estimated using both
a perpetuity growth assumption and a multiple of service operating income before amortization. The
discount rates used in the analysis are based on the Company’s weighted average cost of capital and an
assessment of the risk inherent in the projected cash flows. In analyzing the fair value determined by the
DCF analysis the Company also considers a market approach determining a fair value for each unit and
total entity value determined using a market capitalization approach.
The Company tests goodwill and indefinite-lived intangible assets for impairment annually during the
third quarter, or more frequently if events or changes in circumstances warrant. The Company
performed an interim impairment test in December 2008 due to continued changes in economic
conditions and prompted by recent impairments of goodwill and intangible assets in the global
telecommunications industry. The interim impairment test indicated that the estimated fair value of
the Cable systems reporting unit and DTH and Satellite services unit exceeded their carrying value by a
significant amount and no impairment had occurred. The annual impairment test was conducted as at
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Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2009