Rogers 2003 Annual Report Download - page 80

2003 Annual Report Rogers Communications Inc.
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Notes to Consolidated Financial Statements
(o) Subscriber acquisition costs:
The Company expenses commissions and equipment subsidies related to the acquisition of new wireless and cable sub-
scribers upon activation. Sales and marketing and other associated costs related to the acquisition of new wireless, cable
and media subscribers are expensed as incurred.
(p) Stock-based compensation and other stock-based payments:
The Company has a stock option plan for employees and directors. All stock options issued under this plan have an exer-
cise price equal to the fair market value of the underlying Class B Non-Voting shares on the date of grant. As a result, the
Company records no compensation expense on the grant of options to the Company’s employees under the plan. The
Company discloses the pro forma effect of accounting for these awards under the fair value-based method (note 11(d)).
The Company accounts for all stock-based payments to non-employees and employee awards that are direct
awards of stock, call for settlement in cash or other assets, or are stock appreciation rights that call for settlement by the
issuance of equity instruments using the fair value-based method.
Stock-based awards that are settled in cash or may be settled in cash at the option of employees or directors are
recorded as liabilities. The measurement of the liability and compensation cost for these awards is based on the intrinsic
value of the awards. Compensation cost for the awards is recorded in operating income over the vesting period of the
award. Changes in the Company’s payment obligation prior to the settlement date is recorded in operating income over
the vesting period. The payment amount is established for these awards on the date of exercise of the award by the
employee.
The Company also has an employee share purchase plan. Under the terms of the plan, participating employees
with the Company at the end of the term of the plan, which is usually one year, receive a bonus based on a percentage of
their purchase. Compensation expense is recognized in connection with the employee share purchase plan to the extent
of the bonus provided to employees from the market price of the Class B Non-Voting shares on the date of issue.
Consideration paid by employees on the exercise of stock options or the purchase of shares is recorded as share capital
and contributed surplus. The stock option plan and share purchase plan are more fully described in note 11(d).
The Company has a directors’ deferred share unit plan, under which directors of the Company are entitled to elect
to receive their remuneration in deferred share units. Upon departure as a director, these deferred share units are
redeemed by the Company at the then current Class B Non-Voting shares’ market price. Compensation expense is recog-
nized in the amount of the directors’ remuneration as their services are rendered. The related accrued liability is adjusted
to the market price of the Class B Non-Voting shares at each balance sheet date and the related adjustment is recorded in
operating income. At December 31, 2003, a total of 109,604 (2002 – 83,350) deferred share units were outstanding.
(q) Earnings per share:
The Company uses the treasury stock method for calculating diluted earnings per share. The diluted earnings per share cal-
culation considers the impact of employee stock options and other potentially dilutive instruments, as described in note 14.
(r) Guarantees:
Effective January 1, 2003, the Company adopted CICA Accounting Guideline 14, “Disclosure of Guarantees” (“AcG-14”)
(note 20), which requires a guarantor to disclose significant information about certain types of guarantees that it has pro-
vided, including certain types of indemnities and indirect guarantees of indebtedness to others, without regard to the
likelihood of whether it will have to make any payments under the guarantees. The disclosure required by AcG-14 is in
addition to the existing disclosure required for contingencies.
(s) Use of estimates:
The preparation of financial statements requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the year. Actual results could differ from those estimates.
Key areas of estimation, where management has made difficult, complex or subjective judgements, often as a
result of matters that are inherently uncertain are the provision for bad debts, the ability to use income tax loss carry-
forwards and other future tax assets, capitalization of labour and overhead, useful lives of all depreciable assets, asset
retirement obligations and the recoverability of PP&E, goodwill and intangible assets using estimates of future cash
flows. In addition, the Company has made significant investments in companies or businesses, some of which have expe-
rienced significant operating losses and/or experienced recent declines in market valuation. Significant changes in the
assumptions, including those with respect to future business plans and cash flows, could change the recorded amounts
by a material amount. In addition, continuing declines in market valuations and further operating losses of certain
investees could result in impairment of these investments.
(t) Recent Canadian accounting pronouncements:
(i) Revenue arrangements with multiple deliverables:
In December 2003, the Emerging Issues Committee issued Abstract 142, “Revenue Arrangements with Multiple Deliverables”,
which the Company will apply prospectively beginning January 1, 2004. This Abstract is consistent with the U.S. standard
with the same title, and addresses both when and how an arrangement involving multiple deliverables should be divided