NOTE 18
IMPAIRMENT TESTING OF INDEFINITE LIVED PRODUCT
PORTFOLIO, GOODWILL AND PATENTS

GOODWILL Goodwill acquired through business combinations has been allocated to 4 individual cash-generating units for impairment testing as follows:

• Americas Theatre cash- generating unit for goodwill related to the acquisition of CBCI Inc. and Nuvision Inc.
• Management system software cash-generating unit for goodwill related to the acquisition of Delante AS and Internet Technology AS.
• Expressway cash-generating unit for goodwill related to the acquisition of Ridgeway Software and Technology Ltd.
• Streaming products cash-generating unit for goodwill related to the acquisition of Ectus Ltd.

AMERICAS THEATRE CASH-GENERATING UNIT The recoverable amount of the Americas Theatre cash-generating unit has been determined based on a value in use calculation. Cash flow projections are based on budget for 2006 approved by the board of directors and forecasts for the 4 following years approved by senior management. The discount rate applied to the cash flow projections is 9.1 per cent. The average annual growth rate applied to the cash-flow projections is approximately 10%.

MANAGEMENT SYSTEM SOFTWARE CASH-GENERATING UNIT The recoverable amount for the management system software cash-generating unit is determined using cash flow projections based on 5 year forecasts approved by senior management. The discount rate applied to the cash flow projections is 10.6 per cent. The average annual growth rate applied to the cash-flow projections is approximately 8.5%.

EXPRESSWAY CASH-GENERATING UNIT The recoverable amount for the Expressway cash generating unit is determined using cash-flow projections based on the 2006 budget approved by the board of directors in addition to a 4 year forecast approved by senior management. The discount rate applied to the cash-flow projections is 10.6 per cent. The average annual growth rate applied to the cashflow projections is approximately 8.0%.

STREAMING PRODUCTS CASH-GENERATING UNIT The recoverable amount for the streaming products cash generating unit is determined using cash-flow projections based on the 2006 budget approved by the board of directors in addition to a 4 year forecasts approved by senior management. The discount rate applied to the cash-flow projections is 10.6%. The average annual growth rate applied to the cash-flow projections is approximately 30.0%.

KEY ASSUMPTIONS USED IN VALUATION OF CASH-GENERATING UNITS FOR 31 DECEMBER 2005 AND 31 DECEMBER 2004 The following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of goodwill, patents and licenses.

Budgeted gross margins - the basis used to determine the value assigned to the budgeted gross margins is the average gross margin achieved in the year immediately prior to the budgeted year, increased for expected efficiency improvements.

Sales - the basis used to determine budgeted sales is current year sales increased with the sales forecast for the visual communication industry, adjusted for competitiveness from the Company’s side. A decreased growth rate of 5% annually would not initiate an impairment of goodwill.

Operating costs - the basis to determine budgeted operating costs is current year operating costs increased with estimated number of employees, adjusted for operating efficiency. An additional increase in operating costs of 5% would not initiate an impairment of goodwill.

Terminal value - Terminal values have not been calculated for the cash-generating units, with the exception of the Americas Theatre unit. It is assumed 0% growth when calculating the terminal value of the Americas Theatre unit.