Shaw 2012 Annual Report Download - page 27

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Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2012
F. Critical accounting policies and estimates
The Company prepared its Consolidated Financial Statements in accordance with IFRS as
issued by the International Accounting Standards Board (“IASB”). An understanding of the
Company’s accounting policies is necessary for a complete analysis of results, financial
position, liquidity and trends. Refer to Note 2 to the Consolidated Financial Statements for
additional information on accounting policies. The following section discusses key estimates
and assumptions that management has made under IFRS and how they affect the amounts
reported in the Consolidated Financial Statements and notes. Following is a discussion of the
Company’s critical accounting policies:
i) Revenue and expense recognition
Revenue is considered earned as services are performed, provided that at the time of
performance, ultimate collection is reasonably assured. Such performance is regarded as having
been achieved when reasonable assurance exists regarding the measurement of the
consideration that will be derived from rendering the service. Revenue from cable, Internet,
Digital Phone and DTH customers includes subscriber service revenue when earned. The
revenue is considered earned as the period of service relating to the customer billing elapses.
The Company has multiple deliverable arrangements comprised of upfront fees (subscriber
connection fee revenue and/or customer premise equipment revenue) and related subscription
revenue. The Company determined that the upfront fees charged to customers do not constitute
separate units of accounting; therefore, these revenue streams are assessed as an integrated
package.
With Shaw Media, subscriber revenue is recognized monthly based on subscriber levels.
Advertising revenues are recognized in the period in which the advertisements are aired or
displayed on the Companys’ digital properties and recorded net of agency commissions as these
amounts are paid directly to the agency or advertiser. When a sales arrangement includes
multiple advertising spots, the proceeds are allocated to individual advertising spots under the
arrangement based on relative fair values.
Subscriber connection fee revenue
Connection fees have no stand alone value to the customer separate and independent of the
Company providing additional subscription services, therefore the connection fee revenue must
be deferred and recognized systematically over the periods that the subscription services are
earned. There is no specified term for which the customer will receive the related subscription
service, therefore the Company has considered its customer churn rate and other factors, such
as competition from new entrants, to determine the deferral period of two years.
Customer premise equipment revenue and costs
Customer premise equipment available for sale, which generally includes DCT and DTH
equipment, has no stand alone value to the customer separate and independent of the Company
providing additional subscription services. Therefore the equipment revenue must be deferred
and recognized systematically over the periods that the subscription services are earned. As the
equipment sales and the related subscription revenue are considered one transaction,
recognition of the equipment revenue commences once the subscriber service is activated.
There is no specified term for which the customer will receive the related subscription service,
therefore the Company has considered various factors including customer churn, competition
from new entrants, and technology changes to determine the deferral period of two years.
23