Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Adam Shine - National Bank Financial
Adam Shine - National Bank Financial
In the context of the impairment charge, I guess you alluded to Thomas maybe giving us a little more clarity, maybe a few questions. First off you reference in your MD&A, let alone the press release, the context of not only the market backdrop and your specific ad trends in radio but you also talked about how the multiples have adjusted in the marketplace for radio. I’d be curious if you’d be willing to talk about what you think the market multiples are in terms of how you assess the reduction to your goodwill.
Thomas Peddie
We don’t really look at it from a multiple point of view. We look at it more on a discounted cash flow point of view and as you know the multiples are I guess really a judgment and those would vary by circumstances as to what your growth assumptions are, etc. So we look at it more on a discounted cash flow basis.
Adam Shine - National Bank Financial
That’s what I assumed but just the way you worded the text, I thought there might be a little more color there. In regards to your comment vis-a-vie what you thought would be an upsizing potentially or at least in theory regarding the broadcast licenses, can you elaborate on that a little bit further in terms of, you take the charge on goodwill but in theory you think there’d be some upsizing of the broadcast license.
Thomas Peddie
Yes there is but unfortunately we’re not actually able to write it up. Its, I guess kind of the way we might describe it is kind of the [algebra] of goodwill impairment testing. So back in 2000 2002 when we were doing our acquisitions, there was no clearly established methodology for valuing broadcast licenses in a purchase equation and every company did something different.
Some placed more of the purchase price discrepancy in broadcast licenses, some placed it all in goodwill and some did something in between. Our methodology at the time placed a relatively low value on the broadcast licenses and put a larger portion of the purchase price into goodwill.
As valuation methodologies have evolved, today those licenses would be ascribed to a much higher value so when you do the hypothetical purchase equation of the impairment test there’s a notional write-up of the broadcast licenses leaving less room for goodwill. So put another way is that I guess our broadcast licenses are understated by about a$175 million.
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