Cogeco 2013 Annual Report Download - page 63

62 COGECO CABLE INC. 2013 Consolidated financial statements
J) SHARE-BASED PAYMENT
Equity settled awards
The Corporation measures stock options granted to employees that vest rateably over the service period based on the fair value of each
tranche on grant date by using the Black-Scholes pricing model and a compensation expense is recognized on a straight-line basis over
the vesting period applicable to the tranche, with a corresponding increase in share-based payment reserve. Granted options vest equally
over a period of five years beginning one year after the day such options are granted. At the end of each reporting period, the Corporation
revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is
recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment in share-
based payment reserve. When the stock options are exercised, share capital is credited by the sum of the consideration paid and the
related portion previously recorded in share-based payment reserve.
The Corporation measures incentive share units (“ISUs”) granted to employees based on the fair value of the Corporation's subordinate
voting shares at the date of grant and a compensation expense is recognized over the vesting period, with a corresponding increase in
share-based payment reserve. The total vesting period of each grant is three years less one day.
Cash settled awards
The fair value of the amount payable to the Board of Directors in respect of share appreciation rights under the Deferred Share Unit
Plan of the Corporation, which are settled in cash, is recognized as a compensation expense with a corresponding increase in pension
plan liabilities and accrued employee benefits as of the date units are issued to the Board of Directors. The accrued liability is re-measured
at the end of each reporting period, until settlement, using the average closing price of the subordinate voting shares on the Toronto
Stock Exchange for the twenty consecutive trading days immediately preceding by one day the closing date of the reporting period. Any
changes in the fair value of the liability are recognized in profit or loss.
K) EMPLOYEE BENEFITS
Short-term employee benefits
Short-term employee benefits include wages, salaries, compensated absences, profit-sharing and bonuses. They are measured on an
undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid
under short-term cash bonus or profit sharing plans if the Corporation has a present legal or constructive obligation to pay this amount
as a result of past service provided by the employee and the obligation can be estimated reliably.
Defined contribution pension plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions and will have no legal or
constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognized as an
expense in the periods during which services are rendered by employees.
Defined benefit pension plans
Pension costs for defined benefit pension plans are determined using the projected unit credit method (sometimes known as the accrued
benefit method pro-rated on service), with estimated valuation being carried out at the end of each reporting period, when necessary,
and are funded through contributions determined in accordance with this method. The Corporation's net obligation in respect of defined
benefit pension plans is calculated separately for each plan.
Pension expense is charged to salaries, employee benefits and outsourced services and includes:
The cost of pension benefits provided in exchange for employees' services rendered during the period;
Vested past service costs which are recognized immediately;
Unvested past service costs which are amortized on a straight-line basis over the vesting period; and
The interest cost of pension obligations less the expected return on pension fund assets. The Corporation uses the fair value
of plan assets to evaluate plan assets for the purpose of calculating the expected return on plan assets.
The pension plan liability recognized in the statement of financial position represents the present value of the defined benefit obligation
as adjusted for unrecognized past service costs and as reduced by the fair value of plan assets.
The Corporation recognizes actuarial gains or losses in other comprehensive income in the period in which they arise. They are recognized
immediately in retained earnings and they are not reclassified to profit or loss in a subsequent period. Actuarial gains or losses arise
from the difference between the actual rate of return on plan assets for a given period and the expected rate of return on plan assets
for that period, experience adjustments on liabilities, or changes in actuarial assumptions used to determine the defined benefit obligation.