Shaw 2012 Annual Report Download - page 82

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2012 and 2011
[all amounts in millions of Canadian dollars except share and per share amounts]
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 FVLCS determined by the DCF analysis the Company also considers a market
approach determining a recoverable amount for each unit and total entity value determined
using a market capitalization approach. Recent market transactions are taken into account,
when available. The key assumptions used to determine the recoverable amounts, including a
sensitivity analysis, are included in note 10.
(v) Employee benefit plans
The amounts reported in the financial statements relating to the defined benefit pension plans
are determined using actuarial valuations that are based on several assumptions including the
discount rate, rate of compensation increase and the expected return on plan assets (for funded
plans). 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 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 based on the yield of long-term, high-quality corporate fixed
income investments closely matching the term of the estimated future cash flows and is
determined at the end of every year.
(vi) Income taxes
The Company is required to estimate income taxes using substantively enacted tax rates and
laws that will be in effect when the differences are expected to reverse. In determining the
measurement of tax uncertainties, the Company applies a probable weighted average
methodology. Realization of deferred income tax assets is dependent on generating sufficient
taxable income during the period in which the temporary differences are deductible. Although
realization is not assured, management believes it is more likely than not that all recognized
deferred income tax assets will be realized based on reversals of deferred income tax liabilities,
projected operating results and tax planning strategies available to the Company and its
subsidiaries.
(vii) 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. Significant changes in assumptions as to the likelihood and
estimates of the amount of a loss could result in recognition of additional liabilities.
Critical judgements
The following are critical judgements apart from those involving estimation:
(i) Determination of a CGU
Management’s judgement is required in determining the Company’s cash generating units for
the impairment assessment of its indefinite-life intangible assets. The CGUs have been
determined considering operating activities and asset management and are consistent with the
Company’s reporting segments, Cable, DTH and Satellite Services and Media.
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