Cogeco 2007 Annual Report Download - page 52

Download and view the complete annual report

Please find page 52 of the 2007 Cogeco annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 88

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88

50 COGECO CABLE INC. 2007 Notes to Consolidated Financial Statements
1) SIGNIFICANT ACCOUNTING POLICIES (continued)
N) DERIVATIVE FINANCIAL INSTRUMENTS
The Corporation uses cross-currency swap agreements as derivative fi nancial instruments to manage risks from
fl uctuations in exchange rates related to its long-term debt. The Corporation accounts for the fi nancial instruments, under
the accrual method, as hedges and, accordingly, the carrying value of the fi nancial instruments are not adjusted to refl ect
their current market value. The Corporation does not hold or use any derivative instruments for speculative trading
purposes. Net receipts or payments arising from cross-currency swap agreements are recognized as fi nancial expense.
O) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and highly liquid investments that have an original maturity of three months
or less.
P) USE OF ESTIMATES
The preparation of consolidated fi nancial 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 revenue and expenses during the reporting year. Signifi cant areas requiring the
use of management estimates relate to the determination of pension plan liabilities and accrued employee benefi ts, the
determination of allowance for doubtful accounts, the determination of the fair value of assets acquired and liabilities assumed
in business combinations, the useful lives of assets for amortization, the determination of future cash fl ows for the purpose
of impairment testing on all long-lived assets, goodwill and intangible assets with indefi nite lives, the provision for income
taxes and determination of future income tax assets and liabilities and the determination of the fair value of fi nancial
instruments. Actual results could differ from these estimates.
2) BUSINESS ACQUISITION
ACQUISITION OF CABOVISÃO—TELEVISÃO POR CABO, S.A.
On June 2, 2006, the Corporation entered into an agreement with Cable Satisfaction International Inc. (“CSII”), Catalyst
Fund Limited Partnership I and Cabovisão—Televisão por Cabo, S.A. (“Cabovisão”), to purchase, for a total consideration
of ¤461.8 million ($667.5 million), all the shares of the second largest cable telecommunications company in Portugal, an
indirect wholly-owned subsidiary of CSII. The price includes the purchase of senior debt and reimbursement of certain other
Cabovisão liabilities. The acquisition was completed on August 1, 2006 and the fi nal purchase price has been determined
following completion of a post-closing working capital adjustment that occurred on March 9, 2007. According to the
agreement, the fi nal purchase price was reduced by an amount of ¤2,194,000 ($3,371,000).
The acquisition was accounted for using the purchase method. The results of Cabovisão have been consolidated as of the
acquisition date.