Rogers 2010 Annual Report Download - page 113

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT 117
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
was being amortized over a 10-year period ending in 2009.
As a result of this transaction, the carrying amount of the above assets
was higher and additional depreciation expense was 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) CAPITALIZED INTEREST:
Under United States GAAP, 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.
(D) FINANCIAL INSTRUMENTS:
Under Canadian GAAP, the Company 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,
2010, a gain of $97 million ($124 million less income taxes of $27 million)
(2009 – gain of $113 million ($139 million less income taxes of $26
million)) was reclassified from other comprehensive income under
Canadian GAAP to the consolidated statements of income for United
States GAAP.
Under Canadian GAAP, the Company separates the early repayment
option on one of the Company’s debt instruments. During 2009, the
decrease in fair value of this early repayment option, amounting to $4
million was recorded in the consolidated statements of income under
Canadian GAAP as the debt instrument was repaid. Under United States
GAAP, the Company is not permitted to separate the early repayment
option. As the debt instrument was repaid in 2009, no adjustment to
Canadian GAAP was required for 2010.
Under Canadian GAAP, the Company records all transaction costs for
financial assets and financial liabilities in income as incurred. Under
United States GAAP, the Company defers these costs and amortizes
them over the term of the related asset or liability. During 2010, the
Company capitalized $10 million (2009 – $11 million) in debt issuance
costs for United States GAAP purposes. Offsetting this was amortization
of previously deferred transaction costs in 2010 of $10 million
(2009 – $9 million).
The impact of these changes on net income on a pre-tax basis is
summarized as follows for the year ended December 31:
2010 2009
Reclassification from other comprehensive income of change in fair value of derivatives
not accounted for as hedges under United States GAAP $ 124 $ 139
Decrease in fair value of prepayment option not accounted for under United States GAAP –4
Deferral of transaction costs under United States GAAP 10 11
Amortization of deferred transaction costs under United States GAAP (10) (9)
United States GAAP difference in net income (pre-tax) $ 124 $ 145
The impact of these changes on shareholders’ equity is summarized
as follows:
2010 2009
Deferral of transaction costs $ 49 $ 49
United States GAAP difference in ending shareholders’ equity (pre-tax) $ 49 $ 49