Cogeco 2013 Annual Report Download - page 65

64 COGECO CABLE INC. 2013 Consolidated financial statements
Derivatives are recognized initially at fair value and related transaction costs are recognized in profit or loss as incurred. Subsequent to
initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below. Net receipts or
payments arising from derivative agreements are recognized as financial expense.
On initial designation of the hedge, the Corporation formally documents the relationship between the hedging instrument(s) and hedged
item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will
be used to assess the effectiveness of the hedging relationship. The Corporation makes an assessment, both at the inception of the
hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected to be “highly effective” in offsetting
the changes in the cash flows of the respective hedged items during the period for which the hedge is designated and whether the actual
results of each hedge are within a range of 80-125 percent. For a cash flow hedge of a forecasted transaction, the transaction should
be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect reported profit or loss.
Cash flow hedge accounting
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk
associated with a recognized asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion
of changes in the fair value of the derivative is recognized in accumulated other comprehensive income and presented in cash flow
hedge reserve in equity. The amount recognized in other accumulated comprehensive income is removed and included in profit or loss
in the same period as the hedged cash flows affect profit or loss and in the same line item as the hedged item. Any ineffective portion
of changes in the fair value of the derivative is recognized immediately in profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires, is sold, terminated, exercised, or the designation
is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognized in accumulated
other comprehensive income and presented in cash flow hedge reserve in equity, remains there until the forecasted hedged item affects
profit or loss. If the forecasted hedged item is no longer expected to occur, then the balance in accumulated other comprehensive income
is recognized immediately in profit or loss.
In other cases the amount recognized in accumulated other comprehensive income is transferred to profit or loss in the same period in
which, the hedged item affects profit or loss.
Embedded derivatives
Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of
the host contract and the embedded derivative are not closely related. A separate instrument with the same terms as the embedded
derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss. At
August 31, 2013 and 2012, embedded derivatives or non-financial derivatives that require separate fair value recognition on the
consolidated statements of financial position were not significant.
Impairment of financial assets
Trade and other receivables (“receivables”) are assessed at each reporting date to determine whether there is objective evidence that
they are impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition
of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.
Objective evidence that receivables are impaired can include default or delinquency by a debtor or indications that a debtor will enter
into bankruptcy.
The Corporation considers evidence of impairment for receivables at both a specific asset and aggregate basis. All individually significant
receivables are assessed for specific impairment. Those found not to be specifically impaired are then collectively assessed for any
impairment that has been incurred but not yet identified. Receivables that are not individually significant are assessed on an aggregate
basis for impairment by grouping together receivables with similar risk characteristics.
An impairment loss in respect of receivables is calculated as the difference between its carrying amount and the present value of the
estimated future cash flows. Losses are recognized in profit or loss and reflected in an allowance account presented in reduction of
receivables. Interest on the impaired asset continues to be recognized through the unwinding of the discount. When a subsequent event
causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
N) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and highly liquid investments that have an original maturity of three months or less.
O) EARNINGS PER SHARE
The Corporation presents basic and diluted earnings per share data for its multiple and subordinate voting shares. Basic earnings per
share is calculated by dividing the profit or loss attributable to shareholders of the Corporation by the weighted average number of
multiple and subordinate voting shares outstanding during the period, adjusted for subordinate voting shares held in trust under the ISU
Plan. Diluted earnings per share is determined by adjusting the weighted average number of multiple and subordinate voting shares
outstanding for the effects of all dilutive potential subordinate voting shares, which comprise stock options and ISUs granted to employees.