Cogeco 2008 Annual Report Download - page 49

48 COGECO CABLE INC. 2008 Notes to the Consolidated Financial Statements
D) FIXED ASSETS
Fixed assets are recorded at cost. During construction of new assets, direct costs plus a portion of overhead costs are capitalized.
Financial expenses during construction are expensed in the year in which they are incurred . Amortization is recorded mainly on a
straight-line basis over the estimated useful lives over the following periods:
BUILDINGS 40 TO 50 YEARS
CABLE SYSTEMS 4 TO 15 YEARS
EQUIPMENT, PROGRAMMING EQUIPMENT, FURNITURE AND FIXTURES 3 TO 10 YEARS
HOME TERMINAL DEVICES 3 TO 5 YEARS
ROLLING STOCK AND EQUIPMENT UNDER CAPITAL LEASES 5 YEARS
OTHER EQUIPMENT 5 TO 8 YEARS
LEASEHOLD IMPROVEMENTS LEASE TERM
The Corporation reviews, when a triggering event occurs, the carrying values of its fixed assets by comparing the carrying amount of
the asset or group of assets to the expected future undiscounted cash flows to be generated by the asset or group of assets. An
impairment loss is recognized when the carrying amount of an asset or group of assets held for use exceeds the sum of the
undiscounted cash flows expected from its use and eventual disposal. The impairment loss is measured as the amount by which the
asset’s carrying amount exceeds its fair value.
Legal obligations associated with site restoration costs on the retirement of property are recognized in the period in which they can
be reasonably estimated based on currently available information. The obligations are initially measured at fair value and an equal
amount is recorded to fixed assets. Over time, the discounted asset retirement obligations accrete due to the increase in the fair
value resulting from the passage of time. This accretion amount is charged to income. The initial costs are depreciated over the
useful lives of the related fixed assets or the remaining leasehold engagement when applicable. The Corporation does not record an
asset retirement obligation in connection with its cable systems. The Corporation expects to renew all of its agreements with utility
companies to access their support structures in the future, making the retirement date, relating to these assets, undeterminable.
E) DEFERRED CHARGES
Deferred charges include new service launch costs, equipment subsidies, reconnect costs and transaction costs. New service
launch costs are amortized using the straight-line method over a period not exceeding five years. Equipment subsidies and
reconnect costs are amortized over the average life of a customer’s subscription, not exceeding four years. Transaction costs on the
revolving loan and the swingline facility are amortized over the term of the related financing on a straight-line basis.
F) INTANGIBLE ASSETS
Intangible assets with definite lives, such as customer relationships, are recorded at cost and amortized on a straight-line basis over
the average life of a customer’s subscription, ranging from four to eight years. The Corporation reviews, when a triggering event
occurs, the carrying values of its intangible assets with definite lives by comparing the carrying amount of the asset or group of
assets to the expected future undiscounted cash flows to be generated by the asset or group of assets. An impairment loss is
recognized when the carrying amount of an asset of group of assets held for use exceeds the sum of the undiscounted cash flows
expected from its use and eventual disposal. The impairment loss is measured as the amount by which the asset’s carrying amount
exceeds its fair value.
Intangible assets with indefinite lives, such as customer base are not amortized, but tested for impairment annually or more
frequently if changes in circumstances indicate a potential impairment. In conducting impairment testing, the Corporation compares
the carrying value to the sum of the expected future discounted cash flows. When the impairment test indicates that the carrying
amount of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to the excess.
G) GOODWILL
Goodwill represents the difference between the price paid and the fair value attributed to tangible and intangible assets upon the
acquisition of cable systems. Goodwill is not amortized but tested for impairment annually or more frequently if changes in
circumstances indicate a potential impairment. The impairment test first consists of a comparison of the fair value of the reporting
unit to which goodwill is assigned with its carrying amount. When the carrying amount of a reporting unit exceeds its fair value, the
fair value of the reporting unit’s goodwill is compared with its carrying amount to measure the amount of the impairment loss, if any.
Any impairment loss is charged to earnings in the period in which the loss is incurred. The Corporation uses the discounted cash
flow method to determine the fair value of reporting units.