GOODWILL AND INTANGIBLE ASSETS

Goodwill:

Goodwill by reporting unit as at December 31, 2015 and December 31, 2014 is summarized as follows:



	Bulgaria			Croatia			Czech Republic			Romania			Slovak Republic			Slovenia			Total
Gross Balance, December 31, 2013	$	179,609		$	11,149		$	876,447		$	109,028		$	60,303		$	19,400		$	1,255,936
Accumulated impairment losses	(144,639		)	(10,454		)	(287,545		)	(11,028		)	—			(19,400		)	(473,066		)
Balance, December 31, 2013	34,970			695			588,902			98,000			60,303			—			782,870
Foreign currency	(4,115		)	(84		)	(75,807		)	(11,409		)	(7,215		)	—			(98,630		)
Other ⁽¹⁾	—			—			—			(2,842		)	—			—			(2,842		)
Balance, December 31, 2014	30,855			611			513,095			83,749			53,088			—			681,398
Accumulated impairment losses	(144,639		)	(10,454		)	(287,545		)	(11,028		)	—			(19,400		)	(473,066		)
Gross Balance, December 31, 2014	$	175,494		$	11,065		$	800,640		$	94,777		$	53,088		$	19,400		$	1,154,464


⁽¹⁾	Amount represents the goodwill allocated to businesses held-for-sale based on their fair value relative to the fair value of the reporting unit's continuing operations.



	Bulgaria			Croatia			Czech Republic			Romania			Slovak Republic			Slovenia			Total
Gross Balance, December 31, 2014	$	175,494		$	11,065		$	800,640		$	94,777		$	53,088		$	19,400		$	1,154,464
Accumulated impairment losses	(144,639		)	(10,454		)	(287,545		)	(11,028		)	—			(19,400		)	(473,066		)
Balance, December 31, 2014	30,855			611			513,095			83,749			53,088			—			681,398
Foreign currency	(3,129		)	(60		)	(41,149		)	(9,334		)	(5,483		)	—			(59,155		)
Balance, December 31, 2015	27,726			551			471,946			74,415			47,605			—			622,243
Accumulated impairment losses	(144,639		)	(10,454		)	(287,545		)	(11,028		)	—			(19,400		)	(473,066		)
Gross Balance, December 31, 2015	$	172,365		$	11,005		$	759,491		$	85,443		$	47,605		$	19,400		$	1,095,309

Broadcast licenses and other intangible assets:

Changes in the net book value of our broadcast licenses and other intangible assets as at December 31, 2015 and December 31, 2014 is summarized as follows:



	December 31, 2015							December 31, 2014
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Indefinite-lived:
Trademarks	$	83,188	$	—		$	83,188	$	98,250	$	—		$	98,250
Amortized:
Broadcast licenses	191,860		(127,613		)	64,247		209,279		(131,750		)	77,529
Trademarks	614		(614		)	—		—		—			—
Customer relationships	53,120		(49,672		)	3,448		59,011		(51,858		)	7,153
Other	2,138		(1,859		)	279		3,877		(3,431		)	446
Total	$	330,920	$	(179,758	)	$	151,162	$	370,417	$	(187,039	)	$	183,378

Our broadcast licenses above represents our license in the Czech Republic, which is amortized on a straight-line basis through the expiration date of the license, which is 2025. Our customer relationships are deemed to have an economic useful life of, and are amortized on a straight-line basis over, five years to fifteen years.

The estimated amortization expense for our intangible assets with finite lives as of December 31, 2015 is as follows:



2016	$	8,227
2017	8,013
2018	7,828
2019	7,375
2020	7,150

Impairment of goodwill, indefinite-lived intangible assets and long-lived assets:

Process of reviewing goodwill, indefinite-lived intangible assets and long-lived assets for impairment

We review both goodwill and indefinite-lived intangible assets for impairment as at December 31 of each year. Goodwill is evaluated at the reporting unit level and each indefinite-lived intangible asset is evaluated individually. Long-lived assets are evaluated at the asset group level when there is an indication that they may be impaired.

In addition, whenever events occur which suggest any asset in a reporting unit may be impaired, an evaluation of the goodwill and indefinite-lived intangible assets, together with the associated long-lived assets of each asset group, is performed. Outside our annual review, there are a number of factors which could trigger an impairment review, including:


•	under-performance of operating segments or changes in projected results;


•	changes in the manner of utilization of an asset;


•	severe and sustained declines in the trading price of shares of our Class A common stock that are not attributable to factors other than the underlying value of our assets;


•	negative market conditions or economic trends; and


•	specific events, such as new legislation, new market entrants, changes in technology or adverse legal judgments that we believe could have a negative impact on our business.

In testing the goodwill of each reporting unit, the fair value of the reporting unit is compared to the carrying amount of its net assets, including goodwill. If the fair value of the reporting unit is less than its carrying amount, the fair value of the reporting unit is then measured against the fair value of its underlying assets and liabilities, excluding goodwill, to estimate the implied fair value of the reporting unit's goodwill. The fair value of each reporting unit is determined using discounted estimated future cash flow models. Our expectations of these cash flows are developed during our long- and short-range business planning processes and incorporate several variables, including, but not limited to, discounted cash flows of a typical market participant, future market revenue and long-term growth projections, estimated market share for the typical participant and estimated profit margins based on market size and operation type. The cash flow model also assumes outlays for capital expenditures, future terminal values, an effective tax rate assumption and a discount rate based on a number of factors including market interest rates, and a weighted average cost of capital analysis of the media industry which includes adjustments for market risk.

An impairment loss is recognized for any excess of the carrying amount of the reporting unit's goodwill over the implied fair value. If goodwill and another asset or asset group are tested for impairment at the same time, the other assets are tested for impairment before goodwill. If the other asset or asset group is impaired, this impairment loss is recognized prior to goodwill being tested for impairment.

Indefinite-lived intangible assets are evaluated for impairment by comparing the fair value of the asset to its carrying amount. Any excess of the carrying amount over the fair value is recognized as an impairment charge.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to our estimate of the undiscounted future cash flows we expect that asset group will generate. If the carrying amount of an asset exceeds our estimate of its undiscounted future cash flows, an impairment charge is recognized equal to the amount by which the carrying amount exceeds the fair value of the respective asset.

Assessing goodwill, indefinite-lived intangible assets and long-lived assets for impairment is a complex iterative process that requires significant judgment and involves a great deal of detailed quantitative and qualitative business-specific analysis and many individual assumptions which fluctuate with the passage of time. Our estimate of the cash flows our operations will generate in future periods forms the basis for most of the significant assumptions inherent in our impairment reviews. Our expectations of these cash flows are developed during our long- and short-range business planning processes, which are designed to address the uncertainties inherent in the forecasting process by capturing a range of possible views about key trends which govern future cash flow growth. We have observed over many years a strong positive correlation between the macro economic performance of our markets and the size of the television advertising market and ultimately the cash flows we generate. With this in mind, we have placed a high importance on developing our expectations for the future development of the macro economic environment in general, the advertising market and our share of it in particular. While this has involved an appreciation of historical trends, we have placed a higher emphasis on forecasting these market trends, which has involved detailed review of macro-economic data, a range of both proprietary and publicly-available estimates for future market development, and a process of on-going consultation with our segment management teams.

In developing our forecasts of future cash flows, we take into account available external estimates in addition to considering developments in each of our markets, which provide direct evidence of the state of the market and future market development. In concluding whether a goodwill impairment charge is necessary, we perform the impairment test under a range of possible scenarios. In order to check the reasonableness of the fair values implied by our cash flow estimates we also calculate the value of shares of our Class A common stock implied by our cash flow forecasts and compare this to actual traded values to understand the difference between the two.

The table below shows the key measurements involved and the valuation methods applied:



Measurement		Valuation Method
Recoverability of carrying amount		Undiscounted future cash flows (Level 3 inputs*)
Fair value of broadcast licenses		Build-out method (Level 3 inputs*)
Fair value of indefinite-lived trademarks		Relief from royalty method (Level 3 inputs*)
Fair value of reporting units		Discounted cash flow model (Level 3 inputs*)

*As described in Note 14, "Financial Instruments and Fair Value Measurements".

Each method noted above involves a number of significant assumptions over an extended period of time which could materially change our decision as to whether assets are impaired. The most significant of these assumptions include: the discount rate applied, the total advertising market size, achievable levels of market share, forecast OIBDA and capital expenditure and the rate of growth into perpetuity, each described in more detail below:

•

Cost of capital: The cost of capital reflects the return a hypothetical market participant would require for a long-term investment in an asset and can be viewed as a proxy for the risk of that asset. We calculate the cost of capital according to the Capital Asset Pricing Model using a number of assumptions, the most significant of which is a Country Risk Premium (“CRP”). The CRP reflects the excess risk to an investor of investing in markets other than the United States and generally fluctuates with expectations of changes in a country's macro-economic environment. The costs of capital that we have applied to cash flows for our 2015 annual impairment test were broadly in line with those we had used in the 2014 impairment test, with the exception of those applied for our Croatia and Slovenia reporting units. The cost of capital increase in Croatia is due to an increase in the CRP and synthetic risk free rate whereas a decrease in the same factors led to a decrease in the cost of capital in Slovenia.

•

Total advertising market: The size of the television advertising market effectively places an upper limit on the advertising revenue we can expect to earn in each country. Our estimate of the total advertising market is developed from a number of external sources, in combination with a process of on-going consultation with our segment management teams. In our annual impairment review performed in the fourth quarter of 2015, we increased our medium- and long-term view of the size of the television advertising markets compared to the estimates used in the 2014 annual impairment review based on our estimate of the timing and strength of the market recovery.

•

Market share: This is a function of the audience share we expect our stations to generate, and the relative price at which we can sell advertising. Our estimate of the total advertising market is developed from a number of external sources, in combination with a process of on-going consultation with our segment management teams. Our estimates for our market share in our 2015 annual impairment review decreased slightly from those in our 2014 impairment review, however, revenues are expected to increase due to the estimated growth in the total advertising market.

•

Forecast OIBDA: The level of cash flow generated by each operation is ultimately governed by the extent to which we manage the relationship between revenues and costs. We forecast the level of operating costs by reference to (a) the historical absolute and relative levels of costs we have incurred in generating revenue in each reporting unit, (b) the operating strategy of each business and (c) specific forecast costs to be incurred. Our annual impairment review includes assumptions to reflect benefits of cost control measures taken to date, and contemplated further cost control efforts.

•

Forecast capital expenditure: The size and phasing of capital expenditure, both recurring expenditure to replace retired assets and investments in new projects, has a significant impact on cash flows. We forecast the level of future capital expenditure based on current strategies and specific forecast costs to be incurred. In line with our ongoing efforts to protect our operating margins, the absolute levels of capital expenditure forecast remained broadly consistent with the prior year impairment reviews.

•

Growth rate into perpetuity: This reflects the level of economic growth in each of our markets from the final year in our discrete forecast period into perpetuity and is the sum of an estimated real growth rate, which reflects our belief that macro-economic growth in our markets will ultimately converge to Western European markets, and long-term expectations for inflation. Our estimates of these rates are based on observable market data and have declined in most of our operating countries since our 2014 annual impairment test.

Results of goodwill, indefinite-lived intangible assets and long-lived assets impairment testing

The forecasts utilized for our 2015 annual impairment test continued to focus on building our core television broadcasting assets in each country and reflected the increases in revenue, OIBDA and free cash flow achieved in 2014 and 2015.

Upon conclusion of this review, we determined that the fair values of our goodwill and intangible assets were substantially in excess of their respective carrying values. We concluded that the total estimated fair values used for purposes of the test are reasonable by comparing our market capitalization to the results of the discounted cash flows analysis of our reporting units, as adjusted for unallocated corporate assets and liabilities.

In our review during the fourth quarter of 2014, we determined that the fair values of our goodwill and intangible assets were substantially in excess of their respective carrying values.

In 2013, we recorded a charge to impair broadcast licenses, customer relationships, trademarks and goodwill in certain reporting units, as presented below. The fair value of each reporting unit where goodwill was not impaired as of December 31, 2013 was substantially in excess of its carrying amount.

We recognized impairment charges in the following reporting units in respect of goodwill, tangible and intangible assets during the year ended December 31, 2013:



	For the Year ended December 31, 2013
	Trademarks		Customer relationships		Broadcast licenses		Goodwill		Total
Bulgaria	$	12,259	$	23,608	$	—	$	16,813	$	52,680
Slovenia	—		—		7,596		19,400		26,996
Total	$	12,259	$	23,608	$	7,596	$	36,213	$	79,676