Cogeco 2004 Annual Report Download - page 36

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
34 Cogeco Cable Inc. 2004
1SIGNIFICANT ACCOUNTING POLICIES (continued)
i) Segmented information
The Corporation considers its cable distribution and high-speed Internet access activities as a single operating segment.
j) Employees future benefits
The Pension costs, recorded in operating costs, related to the defined contribution pension plan and the collective registered retirement
saving plan are equivalent to the contributions which the Corporation is required to pay in exchange for services provided by employees.
Pension costs for defined benefit pension plans 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 operating costs and includes:
• The cost of pension benefits provided in exchange for employees’ services rendered 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 return 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.
k) Derivative financial instruments
The Corporation uses currency swap agreements and foreign exchange forward contracts as derivative financial instruments to manage risks
from fluctuations in exchange rates related to its long-term debt and accounts payable. The Corporation accounts for the financial instruments,
under the accrual method, as hedges and, accordingly, the carrying value of the financial instruments are not adjusted to reflect their current
market value. The Corporation does not hold or use any derivative instruments for speculative trading purposes. Net receipts or payments
arising from currency swap agreements are recognized as financial expense.
l) Foreign currency translation
Assets and liabilities denominated in foreign currency are translated in Canadian dollars at exchange rates prevailing at the balance sheet date
for monetary items and at transaction date for non-monetary items. Income and expenses are translated at average rates prevailing during the
period except for transactions being hedged which were translated using the terms of the hedges. Amounts payable or receivable on currency
derivatives, all of which are used to hedge foreign currency debt obligations and anticipated transactions are recorded concurrently with the
unrealized gains and losses on the obligations being hedged. Other gains and losses are included in net income. During fiscal year 2004, the
Corporation realized a foreign exchange gain amounting to $697,000 ($643,000 in 2003).
m) Cash and cash equivalents
Cash and cash equivalents include cash and highly liquid investments which have an original maturity of three months or less.
n) Use of estimates
The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities, contingent assets and liabilities and the revenues and
expenses during the reporting year. Actual results could differ from these estimates.