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114 ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
changes in the fair value of the derivative instruments, reflecting
primarily market changes in foreign exchange rates, interest rates,
as well as the level of short-term variable versus long-term fixed
interest rates, are recognized in the consolidated statements
of income immediately. For the year ended December 31, 2007,
the gain of $126 million ($226 million less income taxes of $100 million)
was reclassified from other comprehensive income under
Canadian GAAP to the consolidated statements of income for
United States GAAP.
As a result of the application of the new Canadian GAAP standards,
the Company separated the early repayment option on one
of the Company’s debt instruments and recorded the fair value of
$19 million related to this embedded derivative at January 1, 2007,
with a corresponding decrease in opening deficit of $13 million,
net of income taxes of $6 million. During 2007, the decrease in fair
value of this early repayment option, amounting to $6 million, was
recorded in the consolidated statements of income under Canadian
GAAP. Under United States GAAP, the Company is not permitted to
separate the early repayment option.
Effective January 1, 2007, under Canadian GAAP, the Company
records all transaction costs for financial assets and financial
liabilities in income as incurred. As a result, under Canadian GAAP,
the carrying value of transaction costs of $39 million, net of income
taxes of $20 million, was charged to opening deficit on transition at
January 1, 2007. Under United States GAAP, the Company continues
to defer these costs and amortize them over the term of the related
asset or liability.
The impact of these changes on net income for the year ended
December 31, 2007, is summarized as follows:
(E) UNREALIZED HOLDING GAINS AND LOSSES
ON INVESTMENTS:
United States GAAP requires that certain investments in equity
securities that have readily determinable fair values be stated in
the consolidated balance sheets at their fair values. The unrealized
holding gains and losses from these investments, which are
considered to be available-for-sale investments under United States
GAAP, are included in accumulated other comprehensive income
within shareholders’ equity, net of related income taxes. Prior to
January 1, 2007, under Canadian GAAP, these investments were
recorded at cost in the consolidated balance sheets.
Effective January 1, 2007, the Company adopted the new Canadian
GAAP accounting standards for financial instruments (note 2(h)(i)).
Under the new Canadian GAAP standards, available-for-sale
investments are carried at fair value on the consolidated balance
sheet, with changes in fair value recorded in other comprehensive
income, net of income taxes. As a result, effective January 1, 2007,
there is no adjustment for unrealized holdings gains and losses on
investments required to arrive at United States GAAP shareholders’
equity at December 31, 2007.
(F) FINANCIAL INSTRUMENTS:
Effective January 1, 2007, the Company adopted the new Canadian
GAAP accounting standards for financial instruments (note 2(h)(i)).
As a result, under Canadian GAAP, the Company now records the
changes in fair value of cash flow hedging derivatives in other
comprehensive income, to the extent effective, until the variability
of cash flows relating to the hedged asset or liability is recognized in
the consolidated statements of income. Under United States GAAP,
these instruments are not accounted for as hedges but instead
2007
Change in fair value of derivatives not accounted for as hedges under United States GAAP $ 226
Decrease in fair value of prepayment option not accounted for under United States GAAP 6
Amortization of deferred transaction costs under United States GAAP (22)
United States GAAP difference in net income, December 31, 2007, (pre-tax) $ 210
The impact of these changes on shareholders’ equity is summarized as follows:
2007
United States GAAP difference in shareholders’ equity, December 31, 2006 $ (519)
Canadian GAAP impact on adoption of new financial instruments standards (note 2(h)(i)) 561
Impact of financial instruments United States GAAP differences on net income, net of income taxes of $100 110
Impact of financial instruments United States GAAP differences on other comprehensive income,
net of income taxes of $100 (126)
United States GAAP difference in shareholders’ equity, December 31, 2007 $ 26