Shaw 2010 Annual Report Download - page 34

for the discount rate, rate of compensation increase, and expected average remaining years of
service of employees. While the Company believes these assumptions are reasonable, differences in
actual results or changes in assumptions could affect employee benefit obligations and the related
income statement impact. The Company accounts for differences between actual and assumed
results by recognizing differences in benefit obligations and plan performance over the working
lives of the employees who benefit from the plan. The most significant assumption used to calculate
the net employee benefit plan expense is the discount rate. The discount rate is the interest rate
used to determine the present value of the future cash flows that is expected will be needed to settle
employee benefit obligations. It is usually based on the yield on long-term, high-quality corporate
fixed income investments and is determined at the end of every year. The following table illustrates
the increase on the accrued benefit obligation and pension expense of a 1% decrease in the
discount rate:
Accrued Benefit
Obligation at
End of Fiscal 2010
Pension Expense
Fiscal 2010
Discount Rate 5.75% 6.75%
Impact of: 1% decrease ($000’s Cdn) 56,480 4,950
ix) Future income taxes
The Company has recognized future income tax assets in respect of its losses and losses of certain of
its subsidiaries. Realization of future income tax assets is dependent upon generating sufficient
taxable income during the period in which the temporary differences are deductible. The Company
has evaluated the likelihood of realization of future income tax assets based on forecasts of taxable
income of future years and based on the ability to reorganize its corporate structure to accommodate
use of tax losses in future years. Assumptions used in these taxable income forecasts are consistent
with internal forecasts and are compared for reasonability to forecasts prepared by external
analysts. Significant changes in assumptions with respect to internal forecasts or the inability
to implement tax planning strategies could result in future impairment of these assets.
x) Commitments and contingencies
The Company is subject to various claims and contingencies related to lawsuits, taxes and
commitments under contractual and other commercial obligations. Contingent losses are
recognized by a charge to income when it is likely that a future event will confirm that an asset
has been impaired or a liability incurred at the date of the financial statements and the amount can
be reasonably estimated. Contractual and other commercial obligations primarily relate to network
fees and operating lease agreements for use of transmission facilities, including maintenance of
satellite transponders and lease of premises in the normal course of business. Significant changes
in assumptions as to the likelihood and estimates of the amount of a loss could result in recognition
of additional liabilities.
H. Related party transactions
Related party transactions are reviewed by Shaw’s Corporate Governance and Nominating
Committee, comprised of independent directors. The following sets forth certain transactions in
which the Company is involved.
Normal course transactions
The Company has entered into certain transactions and agreements in the normal course of
business with certain of its related parties.
30
Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2010