Rogers 2008 Annual Report Download - page 129

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ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT 125
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The cumulative effect of these adjustments on the consolidated
shareholders’ equity of the Company is as follows:
2008 2007
Shareholders’ equity based on Canadian GAAP $ 4,727 $ 4,624
Cumulative impact of differences in business combinations and consolidation accounting (A) (8) (8)
Gain on sale of cable systems (B) 105 109
Pre-operating costs capitalized (C) (2) (3)
Capitalized interest (D) 79 68
Financial instruments (E) 43 26
Stock-based compensation (F) 8 33
Pension liability (G), (L) (107) (123)
Income taxes (H) (20) (17)
Installation revenues and costs, net (I) 12 2
Other (21) (19)
Shareholders’ equity based on United States GAAP $ 4,816 $ 4,692
The areas of material difference between Canadian and United
States GAAP and their impact on the consolidated financial
statements of the Company are described below:
(A) CUMULATIVE IMPACT OF DIFFERENCES IN BUSINESS
COMBINATIONS AND CONSOLIDATION ACCOUNTING:
Certain differences between United States and Canadian GAAP
arose in prior years relating to the dilution gain on the sale of
Wireless shares, non-controlling interest accounting during the
time period that RCI did not own 100% of Wireless, the acquisition
of the outstanding shares in Wireless and the acquisition of a cable
company in Atlantic Canada.
(B) GAIN ON SALE OF CABLE SYSTEMS:
Under Canadian GAAP, the cash proceeds on the non-monetary
exchange of cable assets in prior years were recorded as a reduction
in the carrying value of PP&E. Under United States GAAP, a portion
of the cash proceeds received was recognized as a $40 million gain
in the consolidated statements of income on an after-tax basis. This
difference is being amortized over 10 years.
As a result of this transaction, the carrying amount of the above
assets is higher and additional depreciation expense is recorded
under United States GAAP.
Under Canadian GAAP, the after-tax gain arising on the sale of
certain of the Company’s cable television systems in prior years was
recorded as a reduction of the carrying value of goodwill acquired
in a contemporaneous acquisition of certain cable television
systems. Under United States GAAP, the Company included the
$101 million gain on sale of the cable television systems in income,
net of related income taxes.
(C) PRE-OPERATING COSTS CAPITALIZED:
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 United States GAAP, these costs are
expensed as incurred.
(D) CAPITALIZED INTEREST:
Under United States GA AP, interest costs are capitalized as
part of the historical cost of acquiring certain qualifying assets,
which require a period of time to prepare for their intended use.
Capitalization is not required under Canadian GAAP.
(E) FINANCIAL INSTRUMENTS:
Effective January 1, 2007, the Company adopted the new Canadian
GAAP accounting standards for financial instruments (note 2(h)(ii)).
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, certain instruments are not accounted for as hedges but
instead 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, 2008, a loss of $5 million ($93 million less income taxes of $88
million) was reclassified from other comprehensive income under
Canadian GAAP to the consolidated statements of income for
United States GAAP.