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Effective: April 1, 1998
Responsibility: Vice-President and Chief Financial Officer

STATEMENT OF POLICY

1.1 Programming Valuation

Program inventories are to include direct program costs, including program rights, the cost of direct and indirect labour and facilities and overhead based on the criteria established by management.

1.2 Recording of Program Costs

• The appropriate established program "client field" will be used to identify program categories for analysis and reporting.
• On signing of a procured program agreement, the contract price will be recorded in the appropriate episode/element, with an offsetting entry to a liability account. Episodes are settled on broadcast, while the liability account is adjusted as payments are due.
• Prepayments for sports and special events program rights are to be recorded as prepaid expenses and transferred to inventory only as the event takes place. If the prepayment extends beyond one accounting period, it will be recorded as a deferred charge.
• The Network Finance and Administration offices will advise Accounting Operations at Head Office, twice a year (August 31 and March 31) of those programs which do not meet the following criteria: cost is determined, material is accepted and the program is available for broadcast. Corporate Reporting will make the appropriate entries to special accounts in the General Ledger for reporting purposes.

1.3 Amortization of Program Costs

1.3.1 Amortization of Program Costs-Main Channel:

As a public broadcaster, CBC/Radio-Canada considers many aspects of the programming environment in order to establish its telecast plan such as mandate, public value, audience, revenues and costs. Amortization rates are based on broadcast experience and audience results of previous years as well as broadcast intention.

While the following amortization methods are clearly defined, good business judgment should be the basis for determining which method is appropriate. Any variation from the standard rates listed below, however, must be approved by the Executive Director, Network Programming and Executive Director, Network Finance and Administration.

Amortized program costs will be recorded in unique Cost of Programs Broadcast expense accounts for each inventory category.

1.3.2 Amortization of costs - Specialty Channels

• For specialty channel programs, the amortization methodology is as follows:
• Programs rights and / or licenses should be amortized:

  • equally over the contracted broadcast window or
  • based on intended use.

• Internally produced programs, to which CBC/Radio-Canada has exclusive content rights, will be amortized based on intended use.

1.4 Write-Off/Write Down of Program Costs

The value of program inventories should be reviewed on a regular basis.

Programs deemed unsuitable for completion, programs or rights to programs considered unsuitable for broadcast, and expired program rights will be written-off immediately as they are recognized as such.

The inventory value of programs or rights to programs, which have been aired, will be adjusted if it has been determined that their remaining value or revenue potential is less than originally anticipated.

1.5 Reporting

The networks will maintain detailed subsidiary records on program costs and rights sufficient to provide information to Head Office and to auditors as required.

The networks will also provide to the Corporate Accounting and Reporting department, on a quarterly basis, the list of programs for which the amortization rate vary from the rates listed in section 1.3.1 and the rationale for using a different rate.

1.6 Review of amortization rates

The amortization rates will be reviewed at least every 3 years (performed on an annual progressive basis, with a portion of the programming identified and verified each year) or when there is indication of change in the programming environment, which impact CBC broadcasting practices. The Corporation will consider, in the review, the impact of emerging technologies such as internet in order to evaluate the potential impact of these new technologies on the amortization rates.

HISTORY

• This policy was updated March 2010
• This policy was updated November 2003
• This was originally Corporate Finance and Administration 209.11 - Television Program Inventories - Recording and Valuation

REFERENCES

FASB # 63 Financial Reporting by Broadcasters

PERSON RESPONSIBLE FOR INTERPRETATION AND APPLICATION

All questions pertaining to the interpretation or application of this policy should be referred to the Director, Policy and Internal Control. The responsibility for interpretation of this policy ultimately resides with the Senior Director and Corporate Controller.

DEPARTMENT RESPONSIBLE TO UPDATE THIS WEBPAGE

Corporate Secretariat.

APPENDIX A - PROCEDURES AND GUIDELINES

Write-off - Television Programs

Only Master Data, Head Office, has the access to write-off programs in SAP. This procedure describes the roles and responsibilities of the various offices. The request form, attached below, captures all the information on the program at the time of the write-off. As a result, there will be no need for a write-off report to be submitted at year-end.

Network Finance and Administration Offices

The value of program inventories should be reviewed on a regular basis. Programs deemed unsuitable for completion, programs or rights to programs considered unsuitable for broadcast, and expired program rights will be written-off immediately as they are recognized as such. The inventory value of programs or rights to programs, which have been aired, will be adjusted if it has been determined that their remaining value or revenue potential is less than originally anticipated.

Each network will have its own internal process and levels of authority to write-off programs.

The Senior Network Finance and Administration Officers will complete the attached form, requesting the processing of write-off of programs, forwarding it to Accounting Operations, Head Office.

Head Office

Corporate Reporting will review the request to ensure that all the required information is available and authorize Master Data to process the write-off. Master Data will process the write-off in SAP