Cogeco 2013 Annual Report Download - page 64

Consolidated financial statements COGECO CABLE INC. 2013 63
L) FOREIGN CURRENCY TRANSLATION
Foreign currency transactions
For the purpose of the consolidated financial statements, the profit or loss and financial position of each group entity are expressed in
Canadian dollars, which is the functional and presentation currency of the Corporation for the consolidated financial statements.
Transactions in foreign currencies are translated to the respective functional currency of the Corporation's entities at the exchange rate
in effect at the transaction date. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to
the functional currency at the exchange rate at that date. Foreign currency differences arising on translation are recognized as financial
expense in profit or loss, except for those arising on the translation of financial instruments designated as a hedge of a net investment
in foreign operations, and financial instruments designated as hedging items in a cash-flow hedge, which are recognized in other
comprehensive income until the hedge items are settled or recognized in profit or loss.
Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustment arising on acquisition, are translated to
Canadian dollars using exchange rates prevailing at the end of the reporting period.
Revenue and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly
or significant transactions occurred during that period, in which case the exchange rates at the date of the transactions are used. Exchange
differences arising from the translation process of foreign operations are recognized as foreign currency translation adjustment in other
comprehensive income and accumulated in equity.
The Corporation applies hedge accounting to foreign currency differences arising between the functional currency of the foreign operation
and the parent entity's functional currency (Canadian dollars). Foreign currency differences arising on the translation of the long-term
debt designated as a hedge of a net investment in foreign operations are recognized in other comprehensive income to the extent that
the hedge is effective, and are presented within equity in the foreign currency translation adjustment balance. To the extent that the
hedge is ineffective, such differences are recognized in profit or loss. When the hedged portion of a net investment is disposed of, the
relevant amount in the cumulative amount of foreign currency translation adjustment is transferred to profit or loss as part of the profit
or loss on disposal.
M) FINANCIAL INSTRUMENTS
Classification and measurement
All financial instruments, including derivatives, are included in the statement of financial position initially at fair value when the Corporation
becomes a party to the contractual obligations of the instrument.
Subsequent to initial recognition, non-derivative financial instruments are measured in accordance with their classification as described
below:
Loans and receivables are financial assets with fixed or determinable payments that are not quoted on an open market. Cash
and cash equivalents and trade and other receivables are classified as loans and receivables. They are measured at amortized
cost using the effective interest method, less any impairment loss;
Transaction costs that are directly attributable to the acquisition or related to the issuance of financial assets or liabilities (other
than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of
the financial assets or financial liabilities, as required, upon initial recognition. Transaction costs directly attributable to the
acquisition of financial assets or liabilities are recognized immediately in profit or loss; and
Trade and other payables and long-term debt are classified as other liabilities. They are measured at amortized cost using the
effective interest method. Directly attributable transaction costs are added to the initial fair value of financial instruments except
for those incurred whith respect to the Term Revolving Facilities which are amortized over the term of the related financing on
a straight-line basis.
Financial assets are derecognized only when the Corporation no longer holds the contractual rights to the cash flows of the asset or
when the Corporation transfers substantially all the risks and rewards of ownership of the financial asset to another entity. Financial
liabilities are derecognized only when the Corporation's obligations are discharged, cancelled or expired.
Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only if, there
is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the
assets and settle the liabilities simultaneously.
Derivative financial instruments, including hedge accounting
The Corporation uses cross-currency swaps as derivative financial instruments to manage foreign exchange risk related to its foreign
denominated Senior Secured Notes, Series A. In addition, the Corporation uses interest rate swaps as derivative financial instruments
to manage interest rate risk related to its floating rate long-term debt. The Corporation does not hold or use any derivative financial
instruments for speculative trading purposes.