Shaw 2014 Annual Report Download - page 74

Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2014 and 2013
[all amounts in millions of Canadian dollars except share and per share amounts]
Revenue and expenses
The Company has multiple deliverable arrangements comprised of upfront fees (subscriber
connection and installation fee revenue and/or customer premise equipment revenue) and
related subscription revenue. Upfront fees charged to customers do not constitute separate
units of accounting, therefore these revenue streams are assessed as an integrated package.
(i) Revenue
Revenue from cable, Internet, Digital Phone and DTH customers includes subscriber revenue
earned as services are provided. Satellite distribution services and telecommunications service
revenue is recognized in the period in which the services are rendered to customers. Affiliate
subscriber revenue is recognized monthly based on subscriber levels. Advertising revenues are
recognized in the period in which the advertisements are broadcast 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 fees received from customers are deferred and recognized as revenue on
a straight-line basis over three years. Direct and incremental initial selling, administrative and
connection costs related to subscriber acquisitions are recognized as an operating expense as
incurred. The costs of physically connecting a new home are capitalized as part of the
distribution system and costs of disconnections are expensed as incurred.
Installation revenue received on contracts with commercial business customers is deferred and
recognized as revenue on a straight-line basis over the related service contract, which generally
span two to ten years. Direct and incremental costs associated with the service contract, in an
amount not exceeding the upfront installation revenue, are deferred and recognized as an
operating expense on a straight-line basis over the same period.
(ii) Deferred equipment revenue and deferred equipment costs
Revenue from sales of DTH equipment and DCTs is deferred and recognized on a straight-line
basis over three years commencing when subscriber service is activated. The total cost of the
equipment, including installation, represents an inventoriable cost which is deferred and
recognized on a straight-line basis over the same period. The DCT and DTH equipment is
generally sold to customers at cost or a subsidized price in order to expand the Company’s
customer base.
Revenue from sales of satellite tracking hardware and costs of goods sold is deferred and
recognized on a straight-line basis over the related service contract for monthly service charges
for air time, which is generally five years. The amortization of the revenue and cost of sale of
satellite service equipment commences when goods are shipped.
Recognition of deferred equipment revenue and deferred equipment costs is recorded as
deferred equipment revenue amortization and deferred equipment costs amortization,
respectively.
(iii) Deferred IRU revenue
Prepayments received under indefeasible right to use (“IRU”) agreements are amortized on a
straight-line basis into income over the term of the agreement and included in amortization of
property, plant and equipment, intangibles and other in the consolidated statements of income.
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