Cogeco 2008 Annual Report Download - page 13

12 COGECO CABLE INC. 2008 Management’s Discussion and Analysis
$1.1 million and decreased opening accumulated other comprehensive income by $2.2 million. The impact of measuring the cross-
currency swap agreements at fair value on the consolidated financial statements for the year ended August 31, 2008 decreased
derivative financial instrument liabilities by $3.7 million, increased future income tax liabilities by $0.9 million and increased
accumulated other comprehensive income by $1.9 million.
Net investment hedge
Financial statements of self-sustaining foreign subsidiaries are translated using the rate in effect at the balance sheet date for asset
and liability items, and using the average exchange rates during the period for revenue and expenses. Adjustments arising from this
translation are deferred and recorded as foreign currency translation adjustments in accumulated other comprehensive income and
are included in income only when a reduction in the investment in these foreign subsidiaries is realized. Unrealized foreign
exchange gains and losses on long-term debt denominated in foreign currency that is designated as a hedge of net investments in
self-sustaining foreign subsidiaries are recorded as foreign currency translation adjustments in accumulated other comprehensive
income, net of income taxes. As a result, an amount of $4.5 million was reclassified as at September 1, 2006 from the foreign
currency translation adjustment to accumulated other comprehensive income and the Corporation’s comparative consolidated
financial statements were restated in accordance with transitional provisions.
Embedded derivatives
All embedded derivatives that are not closely related to the host contracts are measured at fair value, with changes in fair value
recorded in the consolidated statements of income. On September 1, 2007 and as at August 31, 2008, there were no significant
embedded derivatives or non-financial derivatives that require separate fair value recognition on the consolidated balance sheets. In
accordance with the new standards, the Corporation selected September 1, 2002, as its transition date for adopting the standard
related to embedded derivatives.
ACCOUNTING CHANGES
In July 2006, the CICA issued Section 1506, Accounting Changes, which modifies certain aspects of the previous standard. A
reporting entity may not change its accounting method unless required by a primary source of GAAP or to provide a reliable and
more relevant presentation of the financial statements. In addition, changes in accounting methods must be applied retroactively
and additional information must be disclosed. This Section applies to interim and annual financial statements relating to fiscal years
beginning on or after January 1, 2007. During the first quarter of fiscal 2008, the Corporation adopted this new standard and
concluded that it had no significant impact on these consolidated financial statements.
FUTURE ACCOUNTING PRONOUNCEMENTS
FINANCIAL INSTRUMENTS
In December 2006, the CICA issued Section 3862, Financial Instruments – Disclosures, Section 3863, Financial Instruments –
Presentation, and Section 1535, Capital Disclosures. All three Sections will be applicable to financial statements relating to fiscal
years beginning on or after October 1, 2007. Accordingly, the Corporation will adopt the new standards for its fiscal year beginning
September 1, 2008. Section 3862 on financial instrument disclosures requires the disclosure of information about the significance of
financial instruments for the entity's financial position and performance and the nature and extent of risks arising from financial
instruments to which the entity is exposed during the period and at the balance sheet date, and how the entity manages those risks.
Section 3863 on the presentation of financial instruments is unchanged from the presentation requirements included in Section
3861. Section 1535 on capital disclosures requires the disclosure of information about an entity's objectives, policies and processes
for managing capital. The Corporation is currently evaluating the impact of the adoption of these new Sections on its consolidated
financial statements.
GOODWILL AND INTANGIBLE ASSETS
In February 2008, the CICA issued Section 3064, Goodwill and intangible assets, replacing Section 3062, Goodwill and other
intangible assets and Section 3450, Research and development costs. The new Section establishes standards for the recognition,
measurement, presentation and disclosure of goodwill subsequent to its initial recognition and of intangible assets by profit-oriented
enterprises. Standards concerning goodwill are unchanged from the standards included in the previous Section 3062. The new
Section will be applicable to interim and annual financial statements relating to fiscal years beginning on or after
October 1, 2008. The Corporation is currently evaluating the impact of the adoption of this new Section on its consolidated financial
statements.
HARMONIZATION OF CANADIAN AND INTERNATIONAL STANDARDS
In March 2006, the Accounting Standards Board of the CICA released its new strategic plan, which proposed to abandon Canadian
GAAP and effect a complete convergence to the International Financial Reporting Standards (“IFRS”).