Cogeco 2009 Annual Report Download - page 59

58 COGECO CABLE INC. 2009 Consolidated financial statements
step is performed in order to determine the amount of the impairment loss. The impairment loss is measured as the amount by
which the carrying amount of the reporting unit’s goodwill exceeds its fair value. Any impairment loss is charged to earnings in the
period in which the loss is incurred. The Corporation uses the discounted cash flow method to determine the fair value of reporting
units.
H) INCOME TAXES
Income taxes are accounted for under the asset and liability method. Under this method, future income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between the financial statements’ carrying amounts of existing
assets and liabilities and their respective tax bases. Future income tax assets and liabilities are measured using enacted or
substantively enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected
to be recovered or settled. Future income tax assets are recognized only to the extent that, in the opinion of management, it is more
likely than not that the future income tax asset will be realized.
I) STOCK-BASED COMPENSATION
The Corporation measures stock options granted to employees based on the fair value at the grant date by using the binomial
pricing model and a compensation expense is recognized on a straight-line basis over the vesting period, which is three to four
years, with a corresponding increase in the contributed surplus. When the stock options are exercised, capital stock is credited by
the sum of the consideration paid and the related portion previously recorded in the contributed surplus.
The Deferred Share Unit Plan of the Corporation is recognized as a compensation expense and as an accrued liability as of the date
units are awarded to officers. The accrued liability is re-measured at the end of each reporting period, until settlement, using the
shares’ trading price at the closing date of the reporting period.
J) EMPLOYEE FUTURE BENEFITS
The pension costs, recorded in operating costs, related to the defined contribution pension plan and the collective registered
retirement savings plans are equivalent to the contributions that the Corporation is required to pay in exchange for services
rendered by employees.
Pension costs for defined benefit pension plans are determined using actuarial methods and are funded through contributions
determined in accordance with the projected benefit method prorated on service. Pension expense is charged to operating costs
and includes:
• The cost of pension benefits provided in exchange for employees’ services rendered during the year;
• The amortization of past service costs and amendments over the expected average remaining service life of the active
employee group covered by the plans, which is eight to eleven years; and
• The interest cost of pension obligations, the expected return on pension fund assets and the amortization of cumulative
unrecognized net actuarial gains and losses in excess of 10% of the greater of the benefit obligation or fair value of plan assets
over the expected average remaining service life of the active employee group covered by the plans, which is eight to eleven
years. The Corporation uses the fair value of plan assets to evaluate plan assets for the purpose of calculating the expected
return on plan assets.
K) NON-MONETARY TRANSACTIONS
In the normal course of its business, the Corporation enters into non-monetary transactions. Non-monetary transactions with
commercial substance, which would otherwise be payable in cash, are accounted for at their fair value.
L) FOREIGN CURRENCY TRANSLATION
Financial statements of self-sustaining foreign subsidiaries are translated into Canadian dollars 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 in the foreign currency translation adjustment in accumulated
other comprehensive income, and are included in income only when a reduction in the investment in these foreign subsidiaries is
realized.
Other assets and liabilities denominated in foreign currencies are translated into Canadian dollars at the exchange rates prevailing
at the balance sheet date for monetary items and at the transaction date for non-monetary items. Revenue and expenses are
translated at the average exchange rates prevailing during the period except for transactions being hedged, which are translated
using the terms of the hedges. Amounts payable or receivable on cross-currency swap agreements, all of which are used to hedge
foreign currency debt obligations, are recorded concurrently with the unrealized gains and losses on the obligations being hedged.
Other foreign exchange gains and losses are recognized as financial expense, except for unrealized foreign exchange gains and