The economic slowdown experienced in the second half of 2011, in both the European and global economies, resulted in reduced advertiser demand. The instability in the macroeconomic environment adversely affected the Company's expectations for the total advertising market in the medium-term and, in turn, affected the fair values of certain of the Company's assets as of September 30 and December 31, 2011. As the result of an interim impairment review performed as of September 30, 2011, the Company recorded non-cash impairment losses totaling $5,707 related to several regional broadcasting licenses, primarily due to a decrease in cash flow projections in response to the more conservative forecast for advertising market growth for 2012 and thereafter. In addition, the Company recorded impairment losses of $11,136 related to the DTV trade name as a result of the re-branding of the channel. In addition, in the impairment review performed at December 31, 2011, based on further developments, the Company revised its estimates of future cash flows, primarily to reflect the revised expectations of Russian advertising market growth for 2012 and increased uncertainty in the medium-term. As of December 31, 2011, the Company recorded additional non-cash impairment losses of $12,550 related to several regional broadcasting licenses, $5,300 related to the Peretz umbrella broadcasting license and $71,688 related to Peretz goodwill. For a detailed discussion, refer to the Company's 2011 Annual Report.

As of September 30, 2012, the Company's impairment loss relates to analog broadcasting licenses reflecting the reassessment of their useful lives from indefinite to finite as a result of recent developments in the transition to digital broadcasting.

On August 22, 2012, the government created an advisory council representing major broadcasters, including the Company, in order to develop principles of implementation of governmental initiatives in the media industry, such as the digitalization project. Further on October 16, 2012, the Russian Federal Service for Supervision in the Sphere of Telecommunications, Information Technologies and Mass Communications (Roskomnadzor) announced the terms of the tender for a second multiplex. The results of the tender are to be announced on December 14, 2012. The announced terms do not contemplate a process for the legal and economic conversion of analog licenses to digital licenses. Governmental authorities have also announced that the existing analog broadcasting system will be switched off following the rollout period, and indicated regional deadlines ranging from 2014 to 2017.

In light of these events, the Company determined that the lives of its analog broadcasting licenses were no longer indefinite. As the broadcasting licenses are no longer expected to continue to contribute to the Company's cash flows for the foreseeable future, the Company tested them for impairment as of September 30, 2012, and commenced amortization from October 1, 2012. As of September 30, 2012, the decrease in estimated cash flows attributable to analog broadcasting licenses resulted in impairment losses of $82,503.

The following table summarizes the impairment losses recorded by the Company in the nine months ended September 30, 2012:

	Nine months ended September 30, 2012

Broadcasting licenses:
Peretz regional and umbrella licenses	$	43,795
CTC regional licenses		19,523
Domashny regional licenses		16,224
Channel 31 license		2,961
Total impairment losses	$	82,503

Income tax effect		(16,501	)

Total effect on consolidated net income	$	66,002

See also Note 2, Basis of presentation and summary of significant accounting policies "—Indefinite-Lived Intangible Assets and Goodwill Impairment Tests" and "—Fair value measurements".

The Company also performed tests for goodwill impairment. The anticipated transition to digital broadcasting also impacted the Company's assumptions used in economic models and its assessment of the carrying value of its goodwill. As of September 30, 2012, the carrying values of goodwill related to CTC, Domashny and Peretz totalled $54,404, $27,069 and $60,645, respectively. Based on information currently available and current assessment of factors that could impact the Company's future cash flows in connection with anticipated digitalization, the estimated fair values of the impacted reporting units (CTC, Domashny and Peretz) were in excess of their respective carrying amounts by more than 10%.

The Company made a decision that all three of its channels participate in the tender for slots in the second multiplex. Given Roskomnadzor's terms for participation in the second multiplex, the Company expects to encounter certain risks and uncertainties in the execution of each of its channels' business models. While the models used in the Company's assessments of its reporting units in its interim impairment testing incorporate changes in assumptions on revenues and costs, as well as risks associated with those uncertainties, depending on further information about the terms of transition to digital broadcasting, the results of the tender for the second multiplex, as well as other future developments, the Company may need to further revise its projected cash flows, which could adversely impact the fair value of its reporting units and related goodwill.

While digital broadcasting would increase the Company's overall technical penetration, the necessary investments for digital migration may not be fully monetized. Currently, the Company believes the most significant of these uncertainties relate to the Company's technical penetration and its impact on advertising revenues, and the Company's overall operating costs during (and following) the transition to digital broadcasting.

There may be other risks and expenses that the Company encounters during and subsequent to the transition that the Company is unable to anticipate at this time that could be material to its future financial position and results of operations. Subject to the availability of further information from the government and market participants, and the Company's ability to make further assessments of the government's plans, additional impairments may be required in the foreseeable future.

In addition, uncertainty remains concerning global economic stability in the medium-term. Any significant continuation or worsening of the current economic instability could result in decreases in the fair values of goodwill and require the Company to record additional impairment losses that could have a material adverse impact on its net income. At September 30, 2012, the Company has determined that no downward adjustments to the macroeconomic outlook are required.

In order to check the reasonableness of the fair values implied by cash flow estimates, the Company also calculates the value of its common stock implied by its cash flow forecasts and compares this to actual traded values. As of September 30, 2012, the Company's consolidated net book value (or shareholders' equity) amounted to $697,319 (after the impairment losses recorded as a result of impairment review, as described above). This compares to a market capitalization of the Company of $1,432,936 as of September 30, 2012 ($1,339,621 as of November 2, 2012).

The Company considers all current information in determining the need for or calculating the amount of any impairment charges, however, future changes in events or circumstances, could result in decreases in the fair values of its intangible assets and goodwill.