CRITICAL ACCOUNTING POLICIES AND ESTIMATES  This discussion and analysis of our financial condition and results of operations is based on our consolidated financial  statements which have been prepared in accordance with accounting principles generally accepted in the United States. The  preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets,  liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our  estimates including those related to bad debts, program contract costs, intangible assets, income taxes, property and equipment,  investments and derivative contracts. We base our estimates on historical experience and on various other assumptions that are  believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying  values of assets and liabilities that are not readily apparent from other sources. These estimates have been consistently applied for  all years presented in this report and in the past we have not experienced material differences between these estimates and actual  results. However, because future events and their effects cannot be determined with certainty, actual results could differ from our  estimates and such differences could be material. We have identified the policies below as critical to our business operations and to the understanding of our results of  operations. For a detailed discussion of the application of these and other accounting policies, see  Note 1. Nature of Operations and  Summary of Significant Accounting Policies,  in the Notes to our Consolidated Financial Statements. Valuation of Goodwill, Long-Lived Assets, Intangible Assets and Equity and Cost Method Investments . We periodically evaluate our  goodwill, broadcast licenses, long-lived assets, intangible assets and equity and cost method investments for potential impairment  indicators. Our judgments regarding the existence of impairment indicators are based on estimated future cash flows, market  conditions, operating performance of our stations and legal factors. Future events could cause us to conclude that impairment  indicators exist and that the net book value of long-lived assets, intangible assets and equity and cost method investments is  impaired. Any resulting impairment loss could have a material adverse impact on our consolidated balance sheets and  consolidated statements of operations. We have determined our broadcast licenses to be indefinite-lived intangible assets in accordance with the accounting guidance  for goodwill and other intangible assets, which requires such assets along with our goodwill to be tested for impairment on an  annual basis or more often when certain triggering events occur. As of December 31, 2010, we had $660.0 million of goodwill,  $47.4 million in broadcast licenses, and $184.7 million in definite-lived intangibles. We test our broadcast licenses and goodwill by  estimating the fair market value of the broadcast licenses, or the fair value of our reporting units in the case of goodwill, using a  combination of quoted market prices, observed earnings/cash flow multiples paid for comparable television stations, discounted  cash flow models and appraisals. We then compare the estimated fair market value to the book value of these assets to determine  if an impairment exists. We aggregate our stations by market for purposes of our goodwill and license impairment testing and we  believe that our markets are most representative of our broadcast reporting units because we view, manage and evaluate our  stations on a market basis. Furthermore, in our markets operated as duopolies, certain costs of operating the stations are shared  including the use of buildings and equipment, the sales force and administrative personnel. Our discounted cash flow model is  based on our judgment of future market conditions within each designated marketing area, as well as discount rates that would be  used by market participants in an arms-length transaction. Future events could cause us to conclude that market conditions have  declined or discount rates have increased to the extent that our broadcast licenses and/or goodwill could be impaired. Any  resulting impairment loss could have a material adverse impact on our consolidated balance sheets, consolidated statements of  operations and consolidated statements of cash flows. Based on assessments performed during the year ended December 31,  2010, we recorded $4.8 million of impairment on our broadcast licenses and other assets, and during the years ended December  31, 2009 and 2008 we recorded $249.8 million and $463.9 million, respectively, in impairment losses on our goodwill, broadcast  licenses and other assets. The impairment charge taken in 2008 was primarily due to the severe economic downturn during the  fourth quarter, and as a result, we made downward revisions to forecasted cash flows, cash flow multiples and growth rates. Of  the $249.8 million in impairment recorded in 2009, we recorded $130.1 million in the first quarter of 2009. We performed an  interim impairment test in the first quarter of 2009 due to the severe economic downturn and continued decrease in our market  capitalization. Accordingly, we made further revisions to our forecasted cash flows, cash flow multiples, and discount rates. The  impairment charge taken during the fourth quarter of 2009 was primarily due to the continued deterioration of the economy  which resulted in further decreases in our forecasted cash flows and increases in our discount rates. The $4.8 million impairment  charge recorded in 2010 was primarily the result of additional cash outflows for increased signal strength necessary to maintain  competitive market positions. The implied value of our broadcast goodwill is calculated using a discounted cash flow model for 4 years and estimating the  terminal value of the reporting units using a multiple of cash flows. The value of our broadcast licenses is calculated using a  discounted cash flow model for eight years and estimating the terminal value based on the constant growth model and a  compound annual growth rate. 10    Sinclair Broadcast Group 