Cogeco 2005 Annual Report Download - page 19

Cogeco Cable Inc. 2005
17
Management’s Discussion and Analysis
Fiscal 2005
Asset Retirement Obligations
In March 2003, the CICA issued Handbook section 3110, Asset
Retirement Obligations, which provides guidance for the recognition,
measurement and disclosure of liabilities for asset retirement
obligations and the associated costs. Some of Cogeco Cable’s
lease agreements contain provisions requiring the Corporation
to dismantle facilities or remove equipment in the event that
the lease agreement is not renewed. However, the Corporation
expects to renew most of its lease agreements related to the
continued operation of the cable business, and, consequently,
any liability related to dismantling, if any, are considered
not significant to the consolidated financial statements.
Variable Interest Entities
In June 2003, the CICA issued Accounting Guideline 15 (AcG-15),
Consolidation of Variable Interest Entities, which defines Variable
Interest Entities (VIE) as entities that have insufficient equity or their
equity investors lack one or more specified essential characteristics
of a controlling financial interest. The standard provides guidance
for determining when an entity is a VIE and which entity, if anyone,
should consolidate the VIE. During fiscal 2005, the Corporation
adopted this new accounting guideline and concluded that it has
no significant impact on these consolidated financial statements.
Future Accounting Pronouncements
Financial Instruments, Hedges and Comprehensive Income
In January 2005, the CICA issued Handbook section 3855, Financial
Instruments – Recognition and Measurement, Handbook section 3865 ,
Hedges and Handbook section 1530, Comprehensive Income.
Section 3855 establishes standards for recognition and measurement
of financial assets, financial liabilities and non-financial derivatives.
The standard specifies when and to which amount a financial
instrument is to be recorded on the balance sheet. Financial
instruments are to be recorded at fair value in some cases,
and at cost in others. The section also provides guidance
for disclosure of gains and losses on financial instruments.
Section 3865 includes and replaces the guidance on hedging
relationships that was previously contained in AcG-13, mostly
those relating to the designation of hedging relationships and its
documentation. The new standard modifies the guidance included
in Section 1650, Foreign Currency Translation, specifying how
to apply hedge accounting and which information has to be
disclosed by the entity.
Section 1530 establishes standards for reporting and display
of comprehensive income. Comprehensive income includes
net income as well as all changes in equity during a period, from
transactions and events from non-owner sources. Comprehensive
income and its components should be presented in a financial
statement with the same prominence as other financial statements.
These sections are to be applied to interim and annual financial
statements relating to fiscal years beginning on or after October 1,
2006. The Corporation is currently evaluating the impact of
these new standards.
Controls and Procedures
The application of Bill 198 and its regulations represents an exercise
in continuous improvement which is leading the Corporation
to formalize the processes and control measures that are already
in place and to introduce new ones. Cogeco Cable has chosen
to make this a strategic endeavour which will result in operational
improvements and better management.
The President and Chief Executive Officer and the Vice President,
Finance and Chief Financial Officer together with management,
after evaluating the effectiveness of the Corporation’s disclosure
controls and procedures as of August 31, 2005, have concluded
that the Corporation’s disclosure controls and procedures were
adequate and effective to ensure that material information relating
to the Corporation and its subsidiaries are disclosed adequately.
To that end, Cogeco Cable has instituted stricter policies and
directives on information disclosure for both internal and external
communications. A disclosure committee has been set up with
the mandate of ensuring the reliability of corporate information
that is disclosed to investors and to the public. The Corporation
has already undertaken a process to review and improve its internal
controls, enabling its officers to certify Cogeco Cable’s compliance
with Regulation 52-111.
Uncertainties and Main Risk Factors
This section outlines general as well as more specific risks
to Cogeco Cable and its subsidiaries that could significantly
affect the financial condition, operating results or business
of the Corporation. It is not intended to cover all possible
contingencies, nor is there any assurance that the risks outlined
in this section will actually unfold as expected or have
the anticipated consequences.
The Corporation has adopted a continuous risk management process
which includes a quarterly assessment of risks and uncertainties
under the oversight of the Audit Committee. As part of this process,
the Corporation endeavours to identify any risks and uncertainties
that are liable to have a major impact on the Corporation’s financial
situation, revenue or activities, and to mitigate them proactively
when appropriate. This section presents the current results of this
process and our risk assessment; it is not intended to describe all
possible factors that might have some influence on the Corporation
or its activities at any point in time, and the risks and uncertainties
described herein may well materialize or evolve in a different way.