Shaw 2011 Annual Report Download - page 31

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2011
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 rights to ensure testing is performed at the appropriate level. The
Company has identified three reporting units, Media being new in 2011, and two other
reporting units that have remained unchanged for a period exceeding 5 years:
ŠCable systems
ŠDTH and satellite services
ŠMedia
The Company also owns AWS licenses that are required to operate a wireless system in Canada.
The AWS licenses have indefinite lives and are subject to an annual review for impairment by
comparing the estimated fair value to the carrying amount. Shaw recently decided not to pursue
a conventional wireless build. The Company currently intends to hold its wireless spectrum
while it reviews all options.
Program rights represent licensed rights acquired to broadcast television programs on the
Company’s conventional and specialty television channels and program advances are in respect of
payments for programming prior to the window license start date. For licensed rights, the Company
records a liability for program rights and corresponding asset when the license period has
commenced and all of the following conditions have been met: (i) the cost of the program is known
or reasonably determinable, (ii) the program material has been accepted by the Company in
accordance with the license agreement and (iii) the material is available to the Company for
telecast. Program rights are expensed on a systematic basis generally over the estimated exhibition
period as the programs are aired and are included in operating, general and administrative expenses
Other intangibles includes software that is not an integral part of the related hardware as well
as a trademark and brands. Software is amortized on a straight line basis over their estimated
useful lives ranging from four to ten years.
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 and the AWS licenses,
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
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