Shaw 2015 Annual Report Download - page 71

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Shaw Communications Inc.
Notes to the Consolidated Financial Statements
August 31, 2015 and 2014
[all amounts in millions of canadian dollars except share and per share amounts]
(iv) Impairment
The Company estimates the recoverable amount of its CGUs using a FVLCS calculation based on a DCF analysis. Significant
judgements are inherent in this analysis including estimating the amount and timing of the cash flows attributable to the
broadcast rights and licenses, the selection of an appropriate discount rate, and the identification of appropriate terminal
growth rate assumptions. In this analysis the Company estimates the discrete future cash flows associated with the intangible
asset for five years and determines a terminal value. The future cash flows are based on the Company’s estimates of future
operating results, economic conditions and the competitive environment. The terminal value is estimated using both a
perpetuity growth assumption and a multiple of operating income before restructuring costs and 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. The DCF analysis uses significant unobservable
inputs and is therefore considered a level 3 fair value measurement.
(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 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 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
reviewed and adjusted as changes are required.
(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 Cable, Satellite, Media and Data centres.
2015 Annual Report Shaw Communications Inc. 69