Cogeco 2009 Annual Report Download - page 60

Consolidated financial statements COGECO CABLE INC. 2009 59
losses on foreign-denominated long-term debt that is designated as a hedge of a net investment in self-sustaining foreign
subsidiaries, which are included in the foreign currency translation adjustment in accumulated other comprehensive income, net of
income taxes.
M) DERIVATIVE FINANCIAL INSTRUMENTS
The Corporation uses cross-currency swap and interest rate swap agreements as derivative financial instruments to manage risks
from fluctuations in interest rate and foreign 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 and interest rate swap agreements, which are designated as cash flow hedges of
the Senior Secured Notes Series A and the Euro-denominated Term Loan facilities and are recorded in other comprehensive
income (note 1 B) iv.). 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 and interest rate swap agreements are recognized as financial expense.
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 accordance with Canadian GAAP 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 finite and indefinite useful lives,
the discount rate used for the purpose of impairment testing on goodwill and intangible assets with indefinite useful lives, the
provision for income taxes and determination of future income tax assets and liabilities and utilization thereof 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) FISCAL 2009 ADJUSTMENTS RELATED TO A FISCAL 2008 BUSINESS ACQUISITION
During fiscal 2009, management has finalized the allocation of the purchase price of the acquisition of Cogeco Data Services Inc.
(“CDS”). The final allocation resulted in an increase in future income tax assets of $420,000 as well as a decrease in future income
tax liabilities of $302,000. The net impact of these adjustments combined with an increase in acquisition costs of $75,000, reduced
goodwill by $647,000 at August 31, 2009 (see note 12 B)).
B) BUSINESS ACQUISITION 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 and 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 the shares of Toronto Hydro Telecom Inc., the
telecommunications subsidiary of Toronto Hydro Corporation Inc. (City of Toronto’s energy company) for a total consideration of
$200 million. In addition, the Corporation assumed a working capital deficiency and certain liabilities totalling approximately