INTANGIBLE ASSETS AND GOODWILL

ACCOUNTING POLICY

RECOGNITION AND MEASUREMENT, INCLUDING AMORTIZATION

Upon initial recognition, we measure intangible assets at cost unless they are acquired through a business combination, in which case they are measured at fair value. We begin recognizing amortization on intangible assets with finite useful lives when the asset is ready for its intended use. Subsequently, the asset is carried at cost less accumulated amortization and accumulated impairment losses.

Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of a separately-acquired intangible asset comprises:


•	its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates; and


•	any directly attributable cost of preparing the asset for its intended use.

Indefinite useful lives

We do not amortize intangible assets with indefinite lives, including spectrum licences, broadcast licences, and certain brand names.

Finite useful lives

We amortize intangible assets with finite useful lives into depreciation and amortization on the Consolidated Statements of Income, except programming rights, which are amortized into operating costs on the Consolidated Statements of Income, on a straight-line basis over their estimated useful lives as noted in the table below. We monitor and review the useful lives, residual values, and amortization methods at least once per year and change them if they are different from our previous estimates. We recognize the effects of changes in estimates in net income prospectively.



Intangible asset	Estimated useful life
Customer relationships	3 to 10 years
Roaming agreements	12 years

Acquired program rights

Program rights are contractual rights we acquire from third parties to broadcast programs, including rights to broadcast live sporting events. We recognize them at cost less accumulated amortization and accumulated impairment losses. We capitalize program rights on the Consolidated Statements of Financial Position when the licence period begins and the program is available for use and amortize them to other external purchases in operating costs on the Consolidated Statements of Income over the expected exhibition period. If we have no intention to air programs, we consider the related program rights impaired and write them off. Otherwise, we test them for impairment as intangible assets with finite useful lives.

The costs for multi-year sports and television broadcast rights agreements are recognized in operating expenses during the applicable seasons based on the pattern in which the rights are aired or are expected to be consumed. To the extent that prepayments are made at the commencement of a multi-year contract towards future years' rights fees, these prepayments are recognized as intangible assets and amortized to operating expenses over the contract term. To the extent that prepayments are made for annual contractual fees within a season, they are included in Other current assets on our Consolidated Statements of Financial Position, as the rights will be consumed within the next twelve months.

Goodwill

We recognize goodwill arising from business combinations when the fair value of the separately identifiable assets we acquired and liabilities we assumed is lower than the consideration we paid (including the recognized amount of the non-controlling interest, if any). If the fair value of the consideration transferred is lower than that of the separately identified assets and liabilities, we immediately recognize the difference as a gain in net income.

IMPAIRMENT TESTING

We test intangible assets with finite useful lives for impairment whenever an event or change in circumstances indicates that their carrying amounts may not be recoverable. We test indefinite-life intangible assets and goodwill for impairment once per year as at October 1, or more frequently if we identify indicators of impairment.

If we cannot estimate the recoverable amount of an individual intangible asset because it does not generate independent cash inflows, we test the entire CGU to which it belongs for impairment.

Goodwill is allocated to CGUs (or groups of CGUs) based on the level at which management monitors goodwill, which cannot be higher than an operating segment. The allocation of goodwill is made to CGUs (or groups of CGUs) that are expected to benefit from the synergies of the business combination from which the goodwill arose.

Recognition and measurement of an impairment charge

An intangible asset or goodwill is impaired if the recoverable amount is less than the carrying amount. The recoverable amount of a CGU or asset is the higher of its:


•	fair value less costs to sell; and


•	value in use.

We reverse a previously recognized impairment loss, except in respect of goodwill, if our estimate of the recoverable amount of a previously impaired asset or CGU has increased such that the impairment recognized in a previous year has reversed. The reversal is recognized by increasing the asset's or CGU’s carrying amount to our new estimate of its recoverable amount. The carrying amount of the asset or CGU subsequent to the reversal cannot be greater than its carrying amount had we not recognized an impairment loss in previous years.

USE OF ESTIMATES AND JUDGMENTS

ESTIMATES

We use estimates in determining the recoverable amount of intangible assets and goodwill. The determination of the recoverable amount for the purpose of impairment testing requires the use of significant estimates, such as:


•	future cash flows;


•	terminal growth rates; and


•	discount rates.

We estimate value in use for impairment tests by discounting estimated future cash flows to their present value. We estimate the discounted future cash flows for periods of up to five years, depending on the CGU, and a terminal value. The future cash flows are based on our estimates and expected future operating results of the CGU after considering economic conditions and a general outlook for the CGU's industry. Our discount rates consider market rates of return, debt to equity ratios, and certain risk premiums, among other things. The terminal value is the value attributed to the CGU's operations beyond the projected time period of the cash flows using a perpetuity rate based on expected economic conditions and a general outlook for the industry.

We determine fair value less costs to sell in one of the following two ways:

•

Analyzing discounted cash flows - we estimate the discounted future cash flows for periods of five to ten years, depending on the CGU, and a terminal value, similar to the value in use methodology described above, while applying assumptions consistent with those a market participant would make. Future cash flows are based on our estimates of expected future operating results of the CGU. Our estimates of future cash flows, terminal values, and discount rates consider similar factors to those described above for value in use estimates; or


•	Using a market approach - we estimate the recoverable amount of the CGU using multiples of operating performance of comparable entities and precedent transactions in that industry.

We make certain assumptions when deriving expected future cash flows, which may include assumptions pertaining to discount and terminal growth rates. These assumptions may differ or change quickly depending on economic conditions or other events. It is therefore possible that future changes in assumptions may negatively affect future valuations of CGUs and goodwill, which could result in impairment losses.

If our estimate of the asset's or CGU's recoverable amount is less than its carrying amount, we reduce its carrying amount to the recoverable amount and recognize the loss in net income immediately.

JUDGMENTS

We make significant judgments that affect the measurement of our intangible assets and goodwill.

Judgment is applied when deciding to designate our spectrum and broadcast licences as assets with indefinite useful lives since we believe the licences are likely to be renewed for the foreseeable future such that there is no limit to the period over which these assets are expected to generate net cash inflows. We make judgments to determine that these assets have indefinite lives, analyzing all relevant factors, including the expected usage of the asset, the typical life cycle of the asset, and anticipated changes in the market demand for the products and services the asset helps generate. After review of the competitive, legal, regulatory, and other factors, it is our view that these factors do not limit the useful lives of our spectrum and broadcast licences.

Judgment is also applied in choosing methods of amortizing our intangible assets and program rights that we believe most accurately represent the consumption of those assets and are most representative of the economic substance of the intended use of the underlying assets.

Finally, we make judgments in determining CGUs and the allocation of goodwill to CGUs or groups of CGUs for the purpose of impairment testing.

EXPLANATORY INFORMATION



(In millions of dollars)	December 31, 2017						December 31, 2016						December 31, 2015
	Cost prior to impairment losses	Accumulated amortization		Accumulated impairment losses		Net carrying amount	Cost prior to impairment losses	Accumulated amortization		Accumulated impairment losses		Net carrying amount	Cost prior to impairment losses	Accumulated amortization		Accumulated impairment losses		Net carrying amount

Indefinite-life intangible assets:
Spectrum licences	6,600	—		—		6,600	6,416	—		—		6,416	6,416	—		—		6,416
Broadcast licences	329	—		(99	)	230	329	—		(99	)	230	324	—		(99	)	225
Brand names	420	(270	)	(14	)	136	420	(270	)	(14	)	136	420	(270	)	(14	)	136

Finite-life intangible assets:
Customer relationships	1,609	(1,525	)	—		84	1,609	(1,470	)	—		139	1,609	(1,414	)	—		195
Roaming agreements	524	(524	)	—		—	524	(524	)	—		—	523	(488	)	—		35
Marketing agreements	10	(10	)	—		—	10	(10	)	—		—	10	(10	)	—		—
Acquired program rights	263	(64	)	(5	)	194	289	(75	)	(5	)	209	332	(91	)	(5	)	236
Total intangible assets	9,755	(2,393	)	(118	)	7,244	9,597	(2,349	)	(118	)	7,130	9,634	(2,273	)	(118	)	7,243
Goodwill	4,126	—		(221	)	3,905	4,126	—		(221	)	3,905	4,126	—		(221	)	3,905

Total intangible assets and goodwill	13,881	(2,393	)	(339	)	11,149	13,723	(2,349	)	(339	)	11,035	13,760	(2,273	)	(339	)	11,148

The tables below summarize the changes in the net carrying amounts of intangible assets and goodwill in 2017 and 2016.



(In millions of dollars)	December 31, 2016		December 31, 2017
	Net carrying amount	Net additions	Amortization ¹		Other ²		Net carrying amount

Spectrum licences	6,416	184	—		—		6,600
Broadcast licences	230	11	—		(11	)	230
Brand names	136	—	—		—		136
Customer relationships	139	—	(55	)	—		84
	6,921	195	(55	)	(11	)	7,050
Acquired program rights	209	59	(64	)	(10	)	194
Total intangible assets	7,130	254	(119	)	(21	)	7,244
Goodwill	3,905	—	—		—		3,905

Total intangible assets and goodwill	11,035	254	(119	)	(21	)	11,149

¹Of the $119 million of total amortization, $64 million related to acquired program rights is included in other external purchases in operating costs (see note 6), and $55 million in depreciation and amortization on the Consolidated Statements of Income.

²Includes disposals, writedowns, reclassifications, and other adjustments.



(In millions of dollars)	December 31, 2015		December 31, 2016
	Net carrying amount	Net additions	Amortization ¹		Other ²		Net carrying amount

Spectrum licences	6,416	—	—		—		6,416
Broadcast licences	225	—	—		5		230
Brand names	136	—	—		—		136
Customer relationships	195	—	(58	)	2		139
Roaming agreements	35	—	(35	)	—		—
	7,007	—	(93	)	7		6,921
Acquired program rights	236	46	(71	)	(2	)	209
Total intangible assets	7,243	46	(164	)	5		7,130
Goodwill	3,905	—	—		—		3,905

Total intangible assets and goodwill	11,148	46	(164	)	5		11,035


¹	Of the $164 million of total amortization, $71 million related to acquired program rights is included in other external purchases in operating costs (see note 6), and $93 million in depreciation and amortization on the Consolidated Statements of Income.


²	Includes disposals, writedowns, reclassifications, and other adjustments.

There were no acquisitions from business combinations for the years ended December 31, 2017 or 2016.

ANNUAL IMPAIRMENT TESTING

For purposes of testing goodwill for impairment, our CGUs, or groups of CGUs, correspond to our operating segments as disclosed in note 4.

Below is an overview of the methods and key assumptions we used in 2017 to determine recoverable amounts for CGUs, or groups of CGUs, with indefinite-life intangible assets or goodwill that we consider significant.



(In millions of dollars, except periods used and rates)
	Carrying value of goodwill	Carrying value of indefinite-life intangible assets	Recoverable amount method	Period of projected cash flows (years)	Terminal growth rates (%)	Pre-tax discount rates (%)

Wireless	1,160	6,733	Value in use	5	0.5	7.9
Cable	1,379	—	Value in use	5	1.0	7.6
Media	937	241	Fair value less cost to sell	5	2.0	12.0

Our fair value measurement for Media is classified as Level 3 in the fair value hierarchy.

We did not recognize an impairment charge related to our goodwill or intangible assets in 2017 or 2016 because the recoverable amounts of the CGUs exceeded their carrying values.