Shaw 2014 Annual Report Download - page 34

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2014
vii) Employee benefit plans
As at August 31, 2014, Shaw had non-registered defined benefit pension plans for key senior
executives and designated executives and various registered defined benefit plans for certain
unionized and non-unionized employees. 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 and rate of compensation increase.
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 differences between actual and assumed results are immediately
recognized in other comprehensive income/loss. 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 and is also used to calculate the interest
income on plan assets. 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 reviewed and
adjusted as changes required. 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 2014
Pension Expense
Fiscal 2014
Weighted Average Discount Rate – Non-registered Plans 4.00% 4.75%
Weighted Average Discount Rate – Registered Plans 4.09% 4.84%
Impact of: 1% decrease ($millions) – Non-registered Plans $ 85 $ 4
Impact of: 1% decrease ($millions) – Registered Plans $ 31 $ 2
viii) Deferred income taxes
The Company has recognized deferred income tax assets and liabilities for the future income
tax consequences attributable to differences between the financial statement carrying amounts
of assets and liabilities and their respective tax bases. Deferred tax assets are also recognized in
respect of losses of certain of the Company’s subsidiaries. The deferred income tax assets and
liabilities are measured using enacted or substantially enacted tax rates expected to apply to
taxable income in the years in which the temporary differences are expected to reverse or the
tax losses are expected to be utilized. Realization of deferred 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 deferred income tax
assets based on forecasts of taxable income of future years, existing tax laws and tax planning
strategies. 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.
ix) 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, program rights and operating lease agreements for use of transmission facilities,
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