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42 COGECO CABLE INC. 2006 Notes to Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended August 31, 2006 and 2005
1. SIGNIFICANT ACCOUNTING POLICIES
The consolidated fi nancial statements are prepared in conformity with Canadian generally accepted accounting principles (“GAAP”).
A) NATURE OF OPERATIONS
Cogeco Cable Inc. (the “Corporation”) is a Canadian public company whose shares are listed on the Toronto Stock Exchange.
The Corporation’s core business is providing cable television, High Speed Internet and Telephony services in Canada and
in Portugal (note 2).
B) PRINCIPLES OF CONSOLIDATION
The consolidated fi nancial 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 fi nancial statements
as of the date of the acquisition of control. Other investments are recorded at cost.
C) RECENT ACCOUNTING PRONOUNCEMENTS AND CHANGES IN ACCOUNTING POLICIES
ADOPTED DURING FISCAL YEAR 2006
i) Non-Monetary Transactions
In June 2005, the Canadian Institute of Chartered Accountants (“CICA”) issued Handbook section 3831,
Non-Monetary
Transactions
, which revised and replaced the current standards on non-monetary transactions. Under the new section, the
criterion for measuring non-monetary transactions at fair value is modifi ed to focus on the assessment of commercial
substance instead of the culmination of the earnings process. A non-monetary transaction has commercial substance
when the entity’s future cash fl ows are expected to change signifi cantly as a result of the transaction. These standards are
effective for non-monetary transactions initiated in periods beginning on or after January 1, 2006. During fi scal year
2006, the Corporation adopted these new standards and concluded that they had no signifi cant impact on these
consolidated fi nancial statements.
ADOPTED DURING FISCAL YEAR 2005
ii) 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 asset retirement
costs. The standard applies to legal or contractual obligations associated with the retirement of a tangible long-lived asset
that result from acquisition, construction, development or normal operations. The standard requires the Corporation to
record the fair value of a liability for an asset retirement obligation in the year in which it is incurred and when a reasonable
estimate of fair value can be made. The standard describes the fair value of a liability for an asset retirement obligation as
the amount at which that liability could be settled in a current transaction between willing parties, that is, other than in a forced
or liquidation transaction. The Corporation is subsequently required to allocate that asset retirement cost to the expense
using a systematic and rational method over the asset’s useful life. The standard applies to fi scal years beginning on or after
January 1, 2004. Certain lease agreements contain provisions requiring the Corporation to restore 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 its cable business and consequently, any liabilities related to the
removal provisions on non-renewed leases, if any, are considered not signifi cant to these consolidated fi nancial statements.
iii) Variable Interest Entities
In June 2003, the CICA issued Accounting Guideline 15 (“AcG-15”),
Consolidation of Variable Interest Entities
, which
defi nes Variable Interest Entities as entities that have insuffi cient equity or their equity investors lack one or more specifi ed
essential characteristics of a controlling fi nancial interest. The standard provides guidance for determining when an entity
is a Variable Interest Entity and which entity, if anyone, should consolidate the Variable Interest Entity. The Guideline applies
to all annual and interim periods beginning on or after November 1, 2004. During fi scal year 2005, the Corporation adopted
this new accounting guideline and concluded that it has no signifi cant impact on these consolidated fi nancial statements.