Cogeco 2013 Annual Report Download - page 61

60 COGECO CABLE INC. 2013 Consolidated financial statements
Intangible assets with finite useful lives
Intangible assets with finite useful lives are amortized over their useful life. The estimated useful lives are reviewed annually, with the
effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with finite useful lives are amortized as
follows:
Customer relationships are amortized on a straight-line basis over the estimated useful life, defined as the average life of a
customer's subscription, not exceeding eight years;
Favorable leases are amortized on a straight-line basis over the remaining non-cancelable term of the lease agreement.
Reconnect and additional service activation costs are capitalized up to a maximum amount not exceeding the revenue generated
by the reconnect activity and are amortized over the average life of a customer's subscription, not exceeding four years; and
Direct and incremental costs associated with the acquisition of Enterprise service customers are capitalized and amortized
over the term of the revenue arrangement.
Intangible assets with indefinite useful lives
Intangible assets with indefinite useful lives are those for which there is no foreseeable limit to their useful economic life as they arise
from contractual or other legal rights that can be renewed without significant cost. They are comprised of Cable Distribution Undertaking
Broadcasting Licenses and Franchise (“Cable Distribution Licenses”) and Trade name. Cable Distribution Licenses are comprised of
broadcast authorities licenses and exemptions from licensing that allow access to homes and customers in a specific area. The Corporation
has concluded that the Cable Distribution Licenses have indefinite useful lives since there are no legal, regulatory, contractual, economic
or other factors that would prevent their renewals or limit the period over which they will contribute to the Corporation's cash flows. The
Trade name is considered to have an indefinite economic life because of the institutional nature of the corporate trade name, their proven
ability to maintain market leadership and profitable operations over long periods of time and the Corporation’s commitment to develop
and enhance their value. The Corporation reviews at the end of each reporting period whether events and circumstances continue to
support indefinite useful life assessment for these licenses and the Trade name. Intangible assets with indefinite useful lives are not
amortized, but tested for impairment at least annually or more frequently if there is any indication of impairment.
Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately
recognized. It is not amortized but tested for impairment at least annually, or whenever there is an indication of possible impairment.
F) IMPAIRMENT OF NON FINANCIAL ASSETS
At the end of each reporting period, the Corporation reviews the carrying value of its property, plant and equipment and intangible assets
with finite useful lives to determine whether there is any indication that those assets may be impaired. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any.
Goodwill and intangible assets with indefinite useful lives are tested for impairment at least annually, or whenever there is an indication
that the asset may be impaired.
The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
For the purpose of impairment testing, assets that cannot be tested on an individual basis are grouped together into the smallest
identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets (“cash-
generating unit” or “CGU”). When a reasonable and consistent basis of allocation can be identified, corporate assets are allocated to
an individual CGU, otherwise they are allocated to the smallest group of CGU for which a reasonable and a consistent basis of allocation
can be identified.
An impairment loss is recognized when the carrying amount of an asset or a CGU exceeds its recoverable amount. Impairment losses
recognized in respect of CGUs are allocated first to reduce the carrying amount of any allocated goodwill and then to reduce the carrying
amount of other assets on a pro rata basis. The impairment loss is recognized immediately in profit or loss in the period in which the
loss is incurred.
Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or
no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have
been determined, net of depreciation or amortization, if no impairment loss had been recognized. A reversal of an impairment loss is
recognized immediately in profit or loss.
For the purpose of impairment testing, goodwill is allocated to each of the Corporation's CGUs that are expected to benefit from the
synergies of the related business combination. An impairment loss recognized for goodwill cannot be reversed.