Shaw 2010 Annual Report Download - page 81

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have been classified as held-for-trading and are recorded at fair value with any change in fair value
immediately recognized in income (loss). Other financial assets are classified as available-for-sale
or as loans and receivables. Available-for-sale assets are carried at fair value with changes in fair
value recorded in other comprehensive income (loss) until realized. Loans and receivables and
financial liabilities are carried at amortized cost. None of the Company’s financial assets are
classified held-to-maturity and none of its financial liabilities are classified as held-for-trading.
Certain private investments where market value is not readily determinable are carried at cost net of
write-downs.
Finance costs, discounts and proceeds on bond forward contracts associated with the issuance of
debt securities are netted against the related debt instrument and amortized to income using the
effective interest rate method. Accordingly, long-term debt accretes over time to the principal
amount that will be owing at maturity. Prior to adopting the new financial instruments standards on
September 1, 2007, such amounts were amortized on a straight-line basis over the period of the
related debt instrument. Upon adoption of these new standards on a retrospective basis without
restatement, $1,754 was credited to opening retained earnings for the cumulative net of tax
difference between the two amortization methods. Transaction costs incurred in respect the
Company’s bank facilities are recorded as deferred charges and amortized over the term of the
facilities.
Derivative financial instruments
The Company uses derivative financial instruments to manage risks from fluctuations in foreign
exchange rates and interest rates. These instruments include cross-currency interest rate exchange
agreements, foreign currency forward purchase contracts and bond forward contracts. Effective
September 1, 2007, all derivative financial instruments are recorded at fair value in the balance
sheet. Where permissible, the Company accounts for these financial instruments as hedges which
ensures that counterbalancing gains and losses are recognized in income in the same period. With
hedge accounting, changes in the fair value of derivative financial instruments designated as cash
flow hedges are recorded in other comprehensive income (loss) until the variability of cash flows
relating to the hedged asset or liability is recognized in income (loss). When an anticipated
transaction is subsequently recorded as a non-financial asset, the amounts recognized in other
comprehensive income (loss) are reclassified to the initial carrying amount of the related asset.
Where hedge accounting is not permissible and derivatives are not designated in a hedging
relationship, they are classified as held-for-trading and the changes in fair value are immediately
recognized in income (loss).
Instruments that have been entered into by the Company to hedge exposure to foreign exchange and
interest rate risk are reviewed on a regular basis to ensure the hedges are still effective and that
hedge accounting continues to be appropriate.
Prior to September 1, 2007, the carrying value of derivative financial instruments designated as
hedges were only adjusted to fair value when hedge accounting was not permissible. The resulting
gains and losses were immediately recognized in income (loss). The adoption of the new financial
instruments standards resulted in a charge of $57,227, net of tax, to accumulated other
comprehensive loss.
77
Shaw Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2010, 2009 and 2008
[all amounts in thousands of Canadian dollars except share and per share amounts]