Rogers 2003 Annual Report Download - page 29

2003 Annual ReportRogers Communications Inc. 27
Accounting for the Gain on Sale and Exchange on Certain Cable Television Systems
Under Canadian GAAP, the cash proceeds of a non-monetary exchange of cable assets in 2000 were recorded as a reduc-
tion in the carrying value of PP&E. Under U.S. GAAP, a portion of the cash proceeds received must be recognized as a gain
in the Consolidated Statement of Income. Under U.S. GAAP, the gain amounted to $40.3 million before income taxes.
In addition, under Canadian GAAP the after tax gain arising on the sale of certain of the Company’s cable televi-
sion systems in prior years was recorded as a reduction in the carrying value of goodwill acquired in a contemporaneous
acquisition of certain cable television systems. Under U.S. GAAP, the gain was included in net income, net of related
deferred income taxes.
As a result of accounting for gains on sale and exchanges of certain cable television systems under U.S. GAAP, the
Company’s income for U.S. GAAP was decreased by $4.0 million for the years ended December 31, 2003 and 2002.
Accounting for Development and Pre-Operating Costs
Under Canadian GAAP, the Company defers the incremental costs relating to the development and pre-operating phases
of new businesses and amortizes these costs on a straight-line basis over periods up to five years. Under U.S. GAAP, these
costs are expensed as incurred. As a result, under U.S. GAAP the consolidated net income for the years ended December 31,
2003 and 2002 was increased by $11.2 million and $12.6 million, respectively.
Accounting for Interest Capitalization and the Related Depreciation Impact
U.S. GAAP requires capitalization of interest costs as part of the historical cost of acquiring certain qualifying assets that
require a period of time to prepare for their intended use. This is not required under Canadian GAAP. The impact of capi-
talizing interest under U.S. GAAP is to increase net income by $5.4 million in 2003 and $7.8 million in 2002.
Classification of Certain Equity Instruments and the Related Interest and Accretion
Under Canadian GAAP, the Convertible Preferred Securities are classified as shareholders’ equity, and the related interest
expense is recorded as a distribution from retained earnings. For U.S. GAAP purposes, these securities are classified as
long-term debt and the related interest expense is recorded in the Consolidated Statement of Income. This adjustment
results in the Company’s net income for U.S. GAAP being decreased by $35.4 million and $92.4 million in each of the years
ended December 31, 2003 and 2002, respectively.
Shares Issued in Connection with a Purchase of a Business
U.S. GAAP requires that shares issued in connection with a purchase business combination be valued-based on the market
price at the announcement date of the acquisition. Canadian GAAP required that shares issued in connection with a pur-
chase business combination be valued based on the market price at the consummation date of the acquisition.
Accordingly, the cost of acquisition of Cable Atlantic Inc. under U.S. GAAP was increased by $35.4 million, resulting in an
increase of goodwill by this amount and a corresponding increase in contributed surplus.
Accounting for Changes in the Fair Value of Financial Instruments
Under U.S. GAAP, the changes in fair value of cross-currency interest rate exchange agreements and interest rate exchange
agreements must be recorded as an adjustment to net income. Accordingly, the Company’s net income under U.S. GAAP
for the years ended December 31, 2003 and 2002 has been increased (decreased) by ($217.5 million) and $126.0 million,
respectively.
Accounting for the Grant of Certain Options to Non-Employees
For U.S. GAAP purposes, options granted to non-employees must be measured at the fair value at grant dates and
recorded as deferred compensation expense and shareholders’ equity. The fair value must be re-measured at each report-
ing date until vesting is complete, with corresponding adjustments to the deferred compensation expense. The deferred
compensation is recognized as compensation expense over the vesting period of the options. As a result of the Blue Jays
not being consolidated with the results of the Company, options granted to employees of the Blue Jays in 2001 are
treated as if they were granted to non-employees. As a result, net income for U.S. GAAP purposes was decreased by
$1.2 million and $1.9 million in the years ended December 31, 2003 and 2002, respectively.
Accounting for Minimum Pension Liability
Under United States GAAP, the Company is required to record an additional minimum pension liability for one of its plans to
reflect the excess of the accumulated benefit obligation over the fair value of the plan assets. Other comprehensive income
has been charged with $5.0 million, net of income taxes of $2.9 million. No such adjustment is required under Canadian GAAP.
YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002
Summarized Consolidated Financial Results
For the year ended December 31, 2003, Cable, Wireless and Media represented 36.5%, 47.1% and 17.6% of Rogers’ consol-
idated revenue, respectively, offset by negative 1.2%, representing corporate items and eliminations. Cable, Wireless and
Management’s Discussion and Analysis