Shaw 2013 Annual Report Download - page 73

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S
haw
C
ommunications Inc
.
N
O
TE
S
T
OCO
N
SO
LIDATED FINAN
C
IAL
S
TATEMENT
S
August 31, 2013 and 201
2
[all amounts in millions of Canadian dollars exce
p
t share and
p
er share amounts
]
Revenue and ex
p
enses
The Company has multiple deliverable arrangements comprised of upfront fees (subscriber
connection and installation fee revenue and/or customer
p
remise e
q
ui
p
ment revenue) and
related subscr
ip
t
i
on revenue. U
pf
ront
f
ees char
g
ed to customers do not const
i
tute se
p
arat
e
u
nits of accounting, therefore these revenue streams are assessed as an integrated package.
(i)
Revenu
e
R
evenue
f
rom cable, Internet, D
igi
tal Phone and DTH customers
i
ncludes subscr
i
ber revenue
earned as services are provided. Satellite distribution services and telecommunications servic
e
revenue is recognized in the period in which the services are rendered to customers. Affiliate
subscr
i
ber revenue
i
s reco
g
n
i
zed monthl
y
based on subscr
i
ber levels. Advert
i
s
i
n
g
revenues are
recogn
i
zed
i
n the per
i
od
i
nwh
i
ch the advert
i
sements are broadcast and recorded net o
f
agency
commissions as these amounts are paid directly to the agency or advertiser. When a sales
arran
g
ement
i
ncludes mult
ip
le advert
i
s
i
n
g
s
p
ots, the
p
roceeds are allocated to
i
nd
i
v
i
dual
advert
i
s
i
ng spots under the arrangement based on relat
i
ve
f
a
i
r values
.
S
ubscr
i
ber connect
i
on
f
ees rece
i
ved
f
rom customers are de
f
erred and recogn
i
zed as revenue on
a straight-line basis over two years. Direct and incremental initial selling, administrative an
d
connect
i
on costs related to subscr
i
ber ac
q
u
i
s
i
t
i
ons are reco
g
n
i
zed as an o
p
erat
i
n
g
ex
p
ense a
s
i
ncurred. The costs o
f
phys
i
cally connect
i
ng a new home are cap
i
tal
i
zed as part o
f
the
d
istribution system and costs of disconnections are expensed as incurred.
I
nstallation revenue received on contracts with commercial business customers is deferred and
reco
g
n
i
zed as revenue on a stra
ig
ht-l
i
ne bas
i
s over the related serv
i
ce contract, wh
i
ch
g
enerall
y
span two to ten years. D
i
rect and
i
ncremental costs assoc
i
ated w
i
th the serv
i
ce contract,
i
nan
amount not exceeding the upfront installation revenue, are deferred and recognized as an
op
erat
i
n
g
ex
p
ense on a stra
ig
ht-l
i
ne bas
i
s over the same
p
er
i
od.
(ii)
De
f
erred equ
i
pment revenue and de
f
erred equ
i
pment cost
s
R
evenue from sales of DTH equipment and digital cable terminals (“DCTs”) is deferred and
reco
g
n
i
zed on a stra
ig
ht-l
i
ne bas
i
s over two
y
ears commenc
i
n
g
when subscr
i
ber serv
i
ce
is
act
i
vated. The total cost o
f
the equ
i
pment,
i
nclud
i
ng
i
nstallat
i
on, represents an
i
nventor
i
abl
e
cost which is deferred and recognized on a straight-line basis over the same period. The DC
T
and DTH e
q
u
ip
ment
i
s
g
enerall
y
sold to customers at cost or a subs
i
d
i
zed
p
r
i
ce
i
n order t
o
expand the
C
ompany’s customer base.
R
evenue
f
rom sales o
f
satell
i
te track
i
ng hardware and costs o
f
goods sold
i
sde
f
erred an
d
recognized on a straight-line basis over the related service contract for monthly service charges
f
or a
i
rt
i
me, wh
i
ch
i
s
g
enerall
yfi
ve
y
ears. The amort
i
zat
i
on o
f
the revenue and cost o
f
sale o
f
satell
i
te serv
i
ce equ
i
pment commences when goods are sh
i
pped
.
R
ecogn
i
t
i
on o
f
de
f
erred equ
i
pment revenue and de
f
erred equ
i
pment costs
i
s recorded a
s
d
eferred equipment revenue amortization and deferred equipment costs amortization,
res
p
ect
i
vel
y
.
69