Cogeco 2008 Annual Report Download - page 51

50 COGECO CABLE INC. 2008 Notes to the Consolidated Financial Statements
which are included in the foreign currency translation adjustment in accumulated other comprehensive income, net of income taxes.
During fiscal year 2008, the Corporation recognized a foreign exchange loss amounting to $191,000 (foreign exchange gain of
$102,000 in 2007) in the consolidated statements of income.
M) DERIVATIVE FINANCIAL INSTRUMENTS
The Corporation uses cross-currency swap agreements as derivative financial instruments to manage risks from fluctuations in
exchange rates related to its long-term debt. On September 1, 2007, the Corporation classified all of its derivative financial
instruments as held-for-trading. Held-for-trading assets and liabilities are carried at fair value on the consolidated balance sheet,
with changes in fair value recorded in the consolidated statements of income, except for the changes in fair value of the cross-
currency swap agreements, which are designated as cash flow hedges of the Senior Secured Notes Series A and are recorded in
other comprehensive income (note 1 B) i.). Prior to September 1, 2007, the Corporation accounted for financial instruments under
the accrual method, as hedges and, accordingly, the carrying value of the financial instruments was not adjusted to reflect their
current fair 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 financial expenses.
N) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and highly liquid investments that have an original maturity of three months or less.
O) USE OF ESTIMATES
The preparation of consolidated financial 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. Significant areas requiring the use of management estimates relate
to the determination of pension plan liabilities and accrued employee benefits, the determination of accrued liabilities, the
determination of allowance for doubtful accounts, the determination of the fair value of assets acquired and liabilities assumed in
business combinations, the evaluation of the carrying amount of home terminal devices, the useful lives of assets for amortization,
the determination of future cash flows for the purpose of impairment testing on fixed assets, goodwill and intangible assets with
definite and indefinite lives, the discount rate used for the purpose of impairment testing on goodwill and intangible assets with
indefinite lives, the provision for income taxes and determination of future income tax assets and liabilities and the determination of
the fair value of financial instruments, including all derivative financial instruments. Actual results could differ from these estimates.
2. BUSINESS ACQUISITIONS AND RELATED ADJUSTMENTS
A) BUSINESS ACQUISITIONS IN FISCAL 2008
On March 31, 2008, the Corporation completed the acquisition of all the assets of MaXess Networx®, ENWIN Energy Ltd.’s (City of
Windsor’s energy company) telecommunications division for a total consideration of $15.6 million. MaXess Networx® operates a
broadband network equipped with next generation ATM and Ethernet technology and provides organizations in south-western
Ontario with the broadband capacity required for data networking, HSI access, e-business applications, video conferencing and
other advanced communications.
On June 30, 2008, the Corporation completed the acquisition of all the assets of FibreWired Burlington Hydro Communications,
Burlington Hydro Electric's (City of Burlington’s energy company) telecommunications division for a total consideration of
$12.6 million. FibreWired Burlington Hydro Communications operates a broadband network equipped with next generation ATM and
Ethernet technology, provides Burlington’s organizations with the broadband capacity required for data networking, HSI access,
hosting services, e-business applications, video conferencing and other advanced communications.
On July 31, 2008, the Corporation completed the acquisition of all of the shares of Toronto Hydro Telecom Inc., the
telecommunications subsidiary of Toronto Hydro Corporation (City of Toronto’s energy company) for a total consideration of
$200 million. In addition, the Corporation assumed a working capital deficiency and liabilities of approximately $4 million. Toronto
Hydro Telecom Inc., which now operates under the name of Cogeco Data Services Inc. (“CDS”), offers data communications and
other telecommunications services such as Ethernet, private line, VoIP, HSI access, dark fibre, data storage, data security and co-
location to a wide range of business customers and organizations throughout the Greater Toronto Area (“GTA”).
These acquisitions were accounted for using the purchase method. The results have been consolidated as of the acquisition dates.