Impairment testing is a critical process for television and radio companies, particularly given the unique regulatory, technological, and market-driven dynamics of the broadcast industry. Annual impairment assessments ensure that companies present a fair value of their assets and comply with accounting standards such as ASC 350/360 (U.S. GAAP). Failure to properly assess and recognize impairments can materially misstate financial results and mislead investors.

Federal Communications Commission (FCC) licenses are among the most valuable intangible assets held by broadcast television and radio companies. Because licenses are legally required to operate on designated spectrum frequencies, their value plays a crucial role in financial reporting, mergers and acquisitions, and regulatory compliance. In addition to annual goodwill impairment testing, annual valuations of FCC licenses are a best practice and often required under U.S. GAAP and ASC 350 for impairment testing of indefinite-lived intangibles.

Below are the major considerations that broadcasters should weigh when conducting annual impairment testing of FCC licenses and goodwill.

Outlook on Revenues and Cash Flows

Key Considerations

  • Market-specific audience size and growth trends: Broadcasting company valuations, and especially FCC license values, are tied to the DMA (television) or audio market ranking (radio) in which their stations operate. Demographics such as population growth, household income, and local ad spend trends strongly affect valuation. Companies should assess local and national advertising forecasts, competition from digital platforms, and cyclical factors such as elections or major sporting events.
  • Regulatory shifts impacting value: FCC licenses are renewable every eight years, which is effectively indefinite as long as renewal criteria are met. Valuations should consider potential regulatory changes such as ownership caps, cross-media rules, or spectrum reallocation.
  • Technological Disruption: Linear TV and traditional radio face audience fragmentation due to streaming and on-demand competition. Projected cash flows may need adjustment for declining audience share and shifts in monetization models.
  • Macroeconomic Conditions: Broader economic cycles significantly impact ad spending. Announcement of recent tariffs may negatively impact the amount companies may choose to spend on television and radio advertising. Recessions typically lead to reduced revenue projections, and the announcement of recent tariffs may negatively impact the amount companies may choose to spend on television and radio advertising, which can trigger impairment. Inflationary pressures on content costs and labor expenses can also reduce margins and impair asset values.
  • Cost Structure and Synergies: Efficiency gains from shared services (e.g., centralized newsrooms or joint sales agreements) can support asset values. Conversely, rising content acquisition costs or union labor disputes can erode expected cash flows.

Determination of Fair Value

Impairment testing involves comparing carrying values to fair values. The determination of Fair Value is typically derived from:

  • The Income Approach, also known as the Discounted cash flow (DCF) analyses
  • Market transactions (recent station sales, mergers)
  • Trading multiples of peer companies

For FCC licenses, the income approach projects cash flows attributable to the license. A hypothetical greenfield scenario is modeled, assuming the license is the only asset. Typically, a projection of five to 10 years with a terminal value is used, discounted by industry weighted average cost of capital (WACC). This approach is favored for financial reporting under ASC 350.

Transparent documentation of assumptions (discount rates, growth projections, terminal values) is critical for audit compliance.

Impact of Recent Transactions in the Broadcasting Industry

For television companies, consolidation has increased significantly in 2025. Scale deals are commanding meaningful premiums to trading price but carry regulatory and integration risk that buyers price into structure and timelines. Local one-off station sales remain more selective and DMA-dependent.

For example, Nexstar’s $6.2 billion all-cash acquisition of TEGNA (at $22/share, approximately 31% premium to the 30-day average) instantly resets expectations for control transactions in broadcasting. Nexstar touts approximately $300 million in annual net synergies and heavy political reach — drivers that support paying above unaffected trading levels even as cord-cutting flattens retransmission consent (“retrans”) growth. However, the combined footprint would greatly exceed current FCC ownership caps and includes overlaps that ordinarily trigger divestitures. Execution risk (regulatory timing, possible remedies) is a non-trivial drag on implied multiples and closing certainty, which are factors that should reflect in discounting and scenario analysis.

Outside of large mergers, discrete station packages are still clearing but at values that hinge on DMA rank, network affiliation, and duopoly potential. For example, Gray Media’s purchase of 10 Allen Media stations for approximately $171 million implies an approximately $17 million per station headline average (actual value is market-mix dependent). Expect stronger pricing where there’s Big Four affiliation, strong reverse-comp terms, and 2026 political exposure.

For radio companies, transaction flow is up in count but down in dollar value; pricing is bifurcated as top-market assets and FM music formats can still clear stick value (i.e., the value of just the license and the fixed assets), while small-market AMs often move at stick value. Balance-sheet fixes (e.g., restructurings) reset comps but don’t erase secular ad pressure.

Key Factors Impacting Valuation Multiples

Key factors include:

  • Political cycles: Presidential-year surges lift trailing and forward EBITDA for even mid-rank DMAs. Valuations are impacted by the certainty of 2026/2028 cycles. Revenue projections should clearly separate political versus core.
  • Retransmission consent and affiliate terms: With retrans growth flattening into single digits, stations that are more reliant on distribution fees may merit lower growth assumptions. Contract quality (rate cards, MFNs, step-ups) becomes a sharper wedge in diligence.
  • Regulatory posture: Expectations of ownership-rule relief are now explicitly underwritten in some TV deals, supporting higher control premiums. However, until rules are final, companies should model probability-weighted outcomes (status quo, partial waivers, and required divestitures).
  • Rate environment and leverage: Higher interest rates raise buyer hurdle rates and temper “stretch” bids except where scale synergies are bankable (e.g., Nexstar’s case). Broadly, macro M&A is thawing but still is price sensitive.
  • Format/DMA mix (radio): FM music in top markets and clusters with meaningful digital revenue attach still command higher valuations, while small-market AMs often price at stick value.

Triggering Events Beyond Annual Tests

While annual impairment testing is required, broadcasters must also monitor for interim triggering events, such as:

  • Sudden regulatory changes (e.g., FCC rule changes)
  • Significant audience declines due to technology shifts
  • Station divestitures or major advertising contract losses

Internal Control Reminders

For broadcasting companies subject to the requirements of Sarbanes-Oxley (SOX), management estimates and the related review controls over those estimates continue to be an area of heighten risk and focus for external auditors.

Management review controls (MRCs) play a critical role in ensuring the accuracy and reliability of financial reporting, particularly when assessing indefinite-lived assets for impairment. This process involves significant judgment and estimation, including assumptions about future cash flows, discount rates, and market conditions. In television and radio, the cash flow estimation process is further complicated by the factors discussed above such as declining growth in retrans and the uneven impact of political revenue.

Management should have a robust process for developing and documenting their assumptions, including evaluation of multiple data sources and consideration of conflicting information. Also, management should carefully consider and document interim impairment triggers based upon a broad assessment of the factors that might indicate the carrying value of its goodwill and/or FCC licenses exceed their fair value (e.g., macroeconomic factors, industry conditions, company-specific events, financial performance, etc.).

Conclusion

For television and radio companies, annual impairment testing is both a compliance exercise and an assessment of long-term sustainability. Companies must carefully evaluate license values, goodwill, revenue trends, and market disruptions to present a transparent and realistic financial picture.

A disciplined approach that blends regulatory, economic, and market-based factors will allow companies to identify risks early, manage stakeholder expectations, and maintain credibility with investors.