Cogeco 2008 Annual Report Download - page 14

Management’s Discussion and Analysis COGECO CABLE INC. 2008 13
In April 2008, the CICA published an exposure draft as guidance which requires the transition to IFRS to replace Canadian GAAP
as currently employed by Canadian publicly accountable enterprises. The changeover will occur no later than fiscal years beginning
on or after January 1, 2011. Accordingly, the Corporation expects that its first interim consolidated financial statements presented in
accordance with IFRS will be for the three-month period ended November 30, 2011, and its first annual consolidated financial
statements presented in accordance with IFRS will be for the year ended August 31, 2012.
IFRS uses a conceptual framework similar to Canadian GAAP, but there are significant differences in recognition, measurement and
disclosure requirements. As a result, the Corporation is developing a plan to convert its consolidated financial statements to IFRS.
The plan highlights the need to identify key accounting policy changes as the first step in the conversion process. Once these
changes have been identified, other elements of the plan will be addressed. The Corporation has selected an external advisor to
assist with the project and is currently in the process of assessing the differences between IFRS and the Corporation’s current
accounting policies.
As implications of the conversion are identified, information technology and data system impacts will be assessed. Similarly, impacts
on business activities will be assessed as differences are identified between the Corporation’s current accounting policies and IFRS.
Changes in accounting policies are likely. These changes may materially impact the Corporation’s consolidated financial
statements.
CONTROLS AND PROCEDURES
The application of Bill 198 and its regulations represents an exercise in continuous improvement, which is leading the Corporation to
formalize 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,
have evaluated the effectiveness of the Corporation’s disclosure controls and procedures and the design of internal controls over
financial reporting as of August 31, 2008 and 2007. They have concluded that the Corporation’s disclosure controls and procedures
were adequate and effective to ensure that material information relating to the Corporation is complete and reliable. However,
certain material weaknesses were identified in the design of internal controls over financial reporting at these dates.
On August 1, 2006, Cogeco Cable purchased Cabovisão in Portugal. During the fiscal year ended August 31, 2007, management
conducted a project to review the design of internal controls over financial reporting of significant processes. As at August 31, 2008,
some key internal controls are still under evaluation and implementation. Some controls over access to databases, segregation of
duties, and policy design are under review as well as some automated controls and will be remediated during the 2009 fiscal year.
On July 31, 2008, Cogeco Cable purchased CDS (formerly known as Toronto Hydro Telecom Inc.). Cogeco Cable’s management
will evaluate and implement key internal controls over significant processes during the 2009 fiscal year.
In recent years, increased penetration of Digital Television, HSI and Telephony services and the launch of different types of home
terminal devices in Canada has heightened the complexity of tracking such customer premise equipment. Existing information
systems at Cogeco Cable in Canada record such equipment located in its warehouse as fixed assets rather than as inventory, and
the home terminal devices are subject to amortization once received. Cogeco Cable’s management has initiated a project to
implement new processes and software to monitor and track its home terminal devices from their initial purchase to their return by
customers. The implementation of such a system could result in an adjustment in the carrying value of these Canadian assets.
During the fiscal year ending August 31, 2008, management has documented evidence of existing controls and designed and
implemented new and enhanced automated and manual internal controls over financial reporting for many processes. There are still
some material weaknesses related to access controls over various databases and automated controls. Therefore, some
modifications to the segregation of duties are currently being implemented. As required under NI 52-109, management anticipates
certifying design and effectiveness of internal controls over financial reporting within the 2009 fiscal year.
UNCERTAINTIES AND MAIN RISK FACTORS
This section outlines general as well as more specific risks faced by Cogeco Cable and its subsidiaries that could significantly affect
the financial condition, operating results or business of the Corporation. It does not purport to cover all contingencies, or to describe
all possible factors that might have an influence on the Corporation or its activities at any point in time. Furthermore, the risks and
uncertainties outlined in this section may or may not materialize in the end, may evolve differently than expected or may have
different consequences than those that are being presently anticipated.
Cogeco Cable applies an on-going risk management process that includes an annual assessment of risks for the Corporation and
its subsidiaries, under the oversight of the Audit Committee. As part of this process, the Corporation endeavours to identify risks that