Shaw 2010 Annual Report Download - page 31

The percentage of direct labour capitalized in many cases is determined by the nature of
employment in a specific department. For example, almost all labour and direct overhead of
the cable regional construction departments is capitalized as a result of the nature of the activity
performed by those departments. Capitalization is also based on piece rate work performed by unit-
based employees which is tracked directly. In some cases, the amount of capitalization depends on
the level of maintenance versus capital activity that a department performs. In these cases, an
analysis of work activity is applied to determine this percentage split; however, such analysis is
subject to overall reasonability checks on the percentage capitalization based on known capital
projects and customer growth.
iv) Property, plant and equipment – capitalization of interest
As permitted by Canadian GAAP, the cost of an item of property, plant and equipment that is
acquired, constructed, or developed over time may include carrying costs, such as interest, which is
directly attributable to such activity. Shaw does not capitalize interest on the construction of its own
assets. Under US GAAP, interest costs are required to be capitalized as part of the cost of certain
qualifying assets during the period of construction.
v) Depreciation policies and useful lives
The Company depreciates the cost of property, plant and equipment and other intangibles over the
estimated useful service lives of the items. These estimates of useful lives involve considerable
judgment. In determining these estimates, the Company takes into account industry trends and
company-specific factors, including changing technologies and expectations for the in-service
period of these assets. On an annual basis, the Company reassesses its existing estimates of useful
lives to ensure they match the anticipated life of the technology from a revenue-producing
perspective. If technological change happens more quickly or in a different way than the Company
has anticipated, the Company might have to shorten the estimated life of certain property, plant and
equipment or other intangibles which could result in higher depreciation expense in future periods
or an impairment charge to write down the value of property, plant and equipment or other
intangibles.
vi) Intangibles
The excess of the cost of acquiring cable and satellite businesses over the fair value of related net
identifiable tangible and intangible assets acquired is allocated to goodwill. Net identifiable
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 3064 “Goodwill and Intangible Assets” and FASB
Accounting Standards Codification section 350 – “Intangibles – Goodwill and Other”. The
Company periodically evaluates the unit of account used to test for impairment of the broadcast
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Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2010