Cogeco 2002 Annual Report Download - page 27

26 Cogeco Cable Inc.
Notes to Consolidated Financial Statements
Years ended August 31, 2002 and 2001
(amounts in tables are in thousands of dollars, except per share data)
1. Significant accounting policies
Nature of operations
Cogeco Cable Inc. (the “Corporation”) is a Canadian public company whose shares are listed on the To ronto Stock
Exchange. The Corporation’s core business is providing cable television services and high-speed Internet access.
Consolidation principles
The consolidated financial statements include the accounts of the Corporation and its subsidiaries. Business
acquisitions are accounted for under the purchase method and operating results are included in the consolidated
financial statements as of the date of the acquisition of control. Other investments are re c o rded at cost.
Revenue recognition
Revenue from cable television and related services, and high-speed Internet access are recognized when
services are provided. Amounts received or invoiced that do not comply with this criterion are accounted for
as deferred and prepaid income.
Fixed assets
Fixed assets are recorded at cost. During construction of new assets, direct costs plus a portion of overhead
costs are capitalized. Depreciation is provided on a straight-line method over the estimated useful lives on the
following periods:
Buildings 40 years
Cable systems 15 years
Equipment, programming equipment, furniture and fixtures 10 years
Decoders, modems and customer’s premise devices 7 years
Rolling stock under capital leases 5 years
Other equipment 5 years
Leasehold improvements Lease term
Deferred charges
Deferred charges include new services launch costs, equipment subsidies and other costs incurred in order to
expand customer base and financing costs. These costs are amortized using the straight-line method, over a
period not exceeding five years. Equipment subsidies and other costs incurred in order to expand customer
base are amortized over a period of four years.
Income taxes
Income taxes are accounted for under the asset and liability method. Under this method, future tax assets and
liabilities are recognized for the future tax consequences attributable to differences between the financial
statements carrying amounts of existing assets and liabilities and their respective tax bases. Future tax assets and
liabilities are measured using enacted or substantially enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be recovered or settled.
Employee future benefits
Pension costs are determined using actuarial methods and are funded through contributions determined in
accordance with the projected benefit method prorated on service. Pension expense is charged to operations
and includes:
•the cost of pension benefits provided in exchange for employees’ services re n d e red during the year;
• the amortization of prior service costs and amendments over the expected average remaining service life of
the active employee group covered by the plans; and
• the interest cost of pension obligations, the re t u rn on pension fund assets, and the amortization of
cumulative unrecognized net actuarial gains and losses in excess of 10% of the greater of the benefit
obligation or fair value of plan assets over the expected average remaining service life of the active
employee group covered by the plans.