10. IMPAIRMENT LOSS

The following table summarizes the impairment losses recorded by the Company in 2011 and 2012 as a result of impairment reviews:

	2011			2012

Broadcasting licenses:
Peretz analog umbrella license	$	5,300		$	22,603
Peretz analog regional licenses		5,582			21,192
CTC analog regional licenses		7,278			19,523
Domashny analog regional licenses		5,398			16,224
Channel 31 analog license		—			2,961
Total analog broadcasting licenses	$	23,558		$	82,503

Peretz Network's goodwill		71,688			—

DTV trade name		11,136			—

Total impairment losses	$	106,382		$	82,503

Income tax effect		(6,939	)		(16,501	)

Total effect on consolidated net income	$	99,443		$	66,002

See details below.

Impairment reviews during 2011

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 in 2011. As the result of an impairment review performed in 2011, the Company recorded non-cash impairment losses totaling $18,258 related to several regional broadcasting licenses, $5,300 related to the Peretz umbrella broadcasting license and $71,688 related to Peretz goodwill, 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. For a detailed discussion, refer to the Company's 2011 Annual Report.

Impairment reviews during 2012

In 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.

Following the government's launch of a first multiplex in 2011, 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 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.

On December 14, 2012, eighteen Russian networks took part in tender for a second multiplex, including all three of the Company's networks: CTC, Domashny and Peretz. A total of ten channels, including the CTC and Domashny channels, were selected for inclusion in the second multiplex. The Company's development strategy covered the eventuality that not all of its channels would be included in the second multiplex. The Company has already developed and approved an alternative transmission plan, which envisages the use of cable and satellite networks, as well as the internet, to provide a substantial level of technical penetration for Peretz.

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 December 31, 2012, the carrying values of goodwill related to CTC, Domashny and Peretz totalled $55,551, $28,039 and $62,075, respectively. Based on information currently available and current assessment of factors that could impact the Company's future cash flows in connection with the 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%.

Given the terms and fees associated with participation in the second multiplex, the Company expects to encounter certain risks and uncertainties in the execution of each of CTC and Domashny channels' business models. It is difficult to predict accurately how the digitalization of broadcasting may affect the market. While digital broadcasting would increase CTC's and Domashny'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 the Company's overall operating costs during (and following) the transition to digital broadcasting. In addition, an uncertainty exists about Peretz's technical penetration and its impact on advertising revenues after the end of analog 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. While the models used in the Company's assessments of its reporting units in its 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 the transition to digital broadcasting, 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. 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. As of December 31, 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 December 31, 2012, the Company's consolidated net book value (or shareholders' equity) amounted to $762,926 (after the impairment losses recorded as a result of impairment review, as described above). This compares to a market capitalization of the Company of $1,230,490 as of December 31, 2012 ($1,529,414 as of February 25, 2013). See also Note 2, Basis of presentation and summary of significant accounting policies "—Goodwill and Indefinite-Lived Intangible Assets Impairment Tests" and "—Fair value measurements".

The fair value of the Production Group reporting unit is highly sensitive to the volume of in-house programming that is expected to be produced and sold to the Company's networks for broadcast. If the Production Group is not successful in developing and producing appropriate levels of quality programming for the Company's networks, the Company may be required to lower its estimates of future production by this unit. A significant decline in original programming compared with planned volumes, or downward revisions of the Company's long-term projections, could result in decreases in the fair value of the Production Group reporting unit, which may then require the Company to record an impairment of the goodwill associated with this segment.

In 2011 and 2012, the volume of in-house produced programming hours contracted by the Company's networks was significantly below those originally anticipated. As of December 31, 2012, the carrying value of Production unit goodwill comprised $32.2 million. In the fourth quarter, the Company performed step-one of the quantitative assessment for the Production Group reporting unit. Based on the quantitative assessment, if the estimated fair value of the Production Group reporting unit decreased by 20%, the Company would be required to perform step-two of the quantitative impairment assessment.

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.