YBTVA » Topics » Broadcast Licenses and Other Intangibles

This excerpt taken from the YBTVA 10-K filed Mar 13, 2008.

Broadcast Licenses and Other Intangibles

        Broadcast licenses represent the excess of the cost of an acquired television station over the sum of the amounts assigned to assets acquired less liabilities assumed. Intangible assets, which include network affiliation agreements and other intangibles, are carried on the basis of cost, less accumulated amortization.

        Broadcast licenses are reviewed annually for impairment or whenever an impairment indicator arises. Intangible assets that have definite lives are amortized over their useful lives. The Company performed its annual impairment test in the fourth quarter of 2005, 2006 and 2007 and determined that the fair value of all indefinite-lived assets were in excess of its carrying value.

        Broadcast licenses and definite-lived intangible assets are as follows:

 
  As of December 31, 2006
  As of December 31, 2007
 
  Gross
Carrying
Amount

  Accumulated
Amortization

  Net
Carrying
Amount

  Gross
Carrying
Amount

  Accumulated
Amortization

  Net
Carrying
Amount

 
  (dollars in thousands)

Indefinite lived intangible assets:                                    
  Broadcast licenses   $ 124,492       $ 124,492   $ 124,492       $ 124,492
   
 
 
 
 
 
Definite lived intangible assets:                                    
  Network affiliations   $ 91,164   $ (33,783 ) $ 57,381   $ 91,164   $ (36,652 ) $ 54,512
  Other intangible assets     2,847     (1,979 )   868     2,847     (2,079 )   768
   
 
 
 
 
 
Total definite lived intangible assets   $ 94,011   $ (35,762 ) $ 58,249   $ 94,011   $ (38,731 ) $ 55,280
   
 
 
 
 
 

        Aggregate amortization expense for the years ended December 31, 2005, 2006 and 2007 was $3.0 million and expects to be $3.0 million in each 2008 through 2012. Network Affiliation Agreements are amortized over 25 years, and other definite lived intangible assets are amortized over 10 to 15 years.

69


Young Broadcasting Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

        It is the Company's policy to account for Network Affiliations and other definite-lived intangible assets at the lower of amortized cost or estimated fair value. As part of an ongoing review of the valuation and amortization of other intangible assets of the Company and its subsidiaries, management assesses the carrying value of Network Affiliations and other definite-lived intangible assets if facts and circumstances suggest that there may be impairment. If this review indicates that Network Affiliations and other definite-lived intangible assets will not be recoverable as determined by a non-discounted cash flow analysis of the operating assets over the remaining amortization period, the carrying value of other intangible assets would be reduced to their estimated fair value.

        The Company tests the broadcast licenses using a "Greenfield" income approach. Under this approach, the broadcast license is valued by analyzing the estimated after-tax discounted future cash flows of the station. The assumptions used in the discounted cash flow models reflect historical station performance, industry standards and trends in the respective markets. An analysis of the financial multiples for publicly-traded broadcasting companies, as well as a comparable sales analysis of television station sales, was also utilized to confirm the results of the income approach. The Company adopted this methodology to value broadcast licenses as the Company believes this methodology has, in recent years, become the methodology generally used within the broadcast industry to value such licenses.

        If operating conditions or assumptions supporting the valuation of these intangible assets materially change in the future, the Company may be required to record impairment charges not previously recorded for these assets.

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