Rogers 2005 Annual Report Download - page 85

81 ROGERS 2005 ANNUAL REPORT . MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table illustrates the increase (decrease) on the accrual benefit obligation and pension expense
for changes in these primary assumptions and estimates:
Accrued Benefit
Obligation at Pension Expense
(In thousands of dollars) End of Fiscal 2005 Fiscal 2005
Discount Rate 5.25% 6.25%
Impact of: 1% increase $ (88,376) $ (9,853)
1% decrease 121,730 13,831
Rate of Compensation Increase 4.00% 4.00%
Impact of: 0.25% increase $ 5,682 $ 935
0.25% decrease (5,811) (950)
Expected Rate of Return on Assets N/A 7.25%
Impact of: 1% increase N/A (4,100)
1% decrease N/A 4,100
AL L O WA N CE FO R DO U BT F UL A CC O UN T S
A significant portion of our revenue is earned from selling on credit to individual consumers and business customers.
The allowance for doubtful accounts is calculated by taking into account factors such as our historical collection and
write-off experience, the number of days the customer is past due and the status of the customer’s account with respect
to whether or not the customer is continuing to receive service. As a result, fluctuations in the aging of subscriber
accounts will directly impact the reported amount of bad debt expense. For example, events or circumstances that result
in a deterioration in the aging of subscriber accounts will in turn increase the reported amount of bad debt expense.
Conversely, as circumstances improve and customer accounts are adjusted and brought current, the reported bad debt
expense will decline.
New Accounting Standards
We adopted the following new accounting standards as a result of changes to Canadian GAAP:
FI N A NC I AL IN S T RU M EN T S
On January 1, 2005, we adopted the amended provisions of The Canadian Institute of Chartered Accountants Handbook
Section 3860, “Financial Instruments – Disclosure and Presentation” (“CICA 3860”) with retroactive application and, as
a result, have reflected the impact of this new accounting policy in the consolidated balance sheet as at December 31,
2005 and 2004 and in the Consolidated Statements of Income and Cash Flows for each of the years in the two-year period
ended December 31, 2005. Section 3860 was amended to provide guidance for classifying as liabilities certain financial
obligations of a fixed amount that may be settled, at the issuer’s option, by a variable number of the issuer’s own equity
instruments. Any financial instruments issued by an enterprise that give the issuer unrestricted rights to settle the principal
amount for cash or the equivalent value of its own equity instruments are no longer presented as equity.
As a result of retroactively adopting Section 3860, we reclassified the liability portion of its 5½% Convertible
Preferred Securities due August 2009 to long-term debt and the related interest expense has been included as interest
expense in the Consolidated Statements of Income. These changes do not affect loss per share since the related interest
expense has, in prior years, been incorporated in determining net loss for the purposes of determining loss per share.
Refer to Note 2(s)(i) for further details on the adjustments to the 2004 comparative amounts.
ST O C K- B AS E D C O MP E NS A TI O N
Effective January 1, 2004, Canadian GAAP requires us to estimate the fair value of stock-based compensation granted to
employees and to expense the fair value over the vesting period of the stock options. In accordance with the transition
rules, we determined the fair value of options granted to employees since January 1, 2002 using the Black-Scholes Option
Pricing Model, and recorded an adjustment to opening retained earnings in the amount of $7.0 million, representing the
expense for the 2002 and 2003 fiscal years. The offset to retained earnings is an increase in our contributed surplus. For
the year ended December 31, 2004, we recognized stock-based compensation expense of approximately $15.1 million.