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Consolidated financial statements COGECO CABLE INC. 2015 83
C) IMPAIRMENT TESTING OF GOODWILL AND INTANGIBLE ASSETS WITH INDEFINITE
USEFUL LIVES
The Corporation performs impairment tests annually, or more frequently when there is an indication that assets may be impaired, based on
CGUs. During the year ended August 31, 2015, the Corporation reassessed its CGUs and determined that goodwill for Canadian cable
services and American cable services should be tested at the operating segment level since it represents the lowest level at which the
goodwill is monitored for management purposes. Also, as a result of the combination of the two business units Cogeco Data Services and
Peer 1 Hosting to form Cogeco Peer 1 in May 2015, the goodwill of the Enterprise data services segment is now tested at the operating
segment level.
For the purpose of impairment testing, goodwill and intangible assets with indefinite useful lives are allocated to each of the Corporation's
CGUs as follows, taking in consideration the above changes:
At August 31, 2015 2014
Operating segment / CGU Goodwill
Cable
Distribution
Licenses Trade name (1) Goodwill
Cable
Distribution
Licenses Trade name
(In thousands of Canadian dollars) $$$ $$$
Canadian cable services 4,662 4,662
Ontario 857,696 —857,696 —
Québec 109,304 —109,304 —
American cable services 793,712 571,398
Southern Florida 246,036 —203,325 —
South Carolina 40,787 —33,706 —
Western Pennsylvania 409,182 —338,150 —
Maryland/Delaware 53,943 —44,579 —
Eastern Connecticut 92,099 ———
Enterprise data services 706,005 —25,934
Cogeco Data Services 205,780 ——
Peer 1 Hosting 438,689 —25,934
Total 1,504,379 1,809,047 25,934 1,220,529 1,586,760 25,934
(1) The trade name belongs to Peer 1 Hosting and it is now tested for impairment at the operating segment level.
At August 31, 2015 and 2014, the Corporation tested the carrying value of goodwill and intangible assets with indefinite useful lives for
impairment. The recoverable amount of each CGU is calculated based on the higher of value in use and fair value less cost to sale. The
value in use was determined using cash flow projections derived from financial projections covering a five-year period. They reflect
management's expectations of revenue growth, expenses and margin for each CGU based on past experience and expected growth for
the segment. Cash flows beyond the five-year period have been extrapolated using an estimated terminal growth rate determined with regard
to projected growth rates for the specific markets in which the CGUs participate and are not considered to exceed the long-term average
growth rates for those markets. Discount rates applied to the cash flow forecasts are derived from the Corporation's pre-tax weighted average
cost of capital, adjusted for the different risk profiles of the individual CGUs. The recoverable amount of each CGU was determined to be
higher than its carrying amount and no impairment loss has been recognized at August 31, 2015 and 2014.
The 2014 calculation of the recoverable amount of the Canadian cable services, which represents the most recent detailed calculation made
in a preceding year, was used in the impairment test of that unit at August 31, 2015 given that all of the following criteria were met:
• the assets and liabilities making up the CGU have not changed significantly since the most recent recoverable amount calculation;
• the most recent recoverable amount calculation resulted in an amount that exceeded the carrying amount of the CGU by a
substantial margin; and
• based on an analysis of events that have occurred and circumstances that have changed since the most recent recoverable
amount calculation, the likelihood that a current recoverable amount determination would be less than the current carrying amount
of the CGU is remote.
The following represents the key assumptions that were used to determine the recoverable amounts in the most recent impairment tests
performed for each of the Corporation operating segment:
At August 31, 2015 2014
Pre-tax
discount rate
Perpetual
growth
rate Pre-tax
discount rate
Perpetual
growth
rate
Operating segment % % % %
Canadian cable services 10.5 to 10.9 2.0 10.5 to 10.9 2.0
American cable services 12.3 to 13.0 2.5 to 2.6 12.1 to 13.0 2.5 to 3.0
Enterprise data services 11.4 3.2 11.7 3.5 to 3.8