Cogeco 2010 Annual Report Download - page 52

Consolidated Financial Statements COGECO CABLE INC. 2010 51
Future accounting pronouncements
vi. Harmonization of Canadian and international accounting standards
In March 2006, the AcSB 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”) for Canadian publicly accountable entities. This plan was confirmed in
subsequent exposure drafts issued in April 2008, March 2009 and October 2009. The changeover will occur no later than fiscal years beginning
on or after January 1, 2011. Accordingly, the Corporation’s first interim consolidated financial statements presented in accordance with IFRS
will be for the three-month period ending November 30, 2011, and its first annual consolidated financial statements presented in accordance
with IFRS will be for the year ending August 31, 2012.
IFRS uses a conceptual framework similar to Canadian GAAP, but there are significant differences in recognition, measurement and disclosure
requirements. The Corporation has established a project team including representatives from various areas of the organization to plan and
complete the transition to IFRS. This team reports periodically to the Audit Committee, which oversees the IFRS implementation project on
behalf of the Board of Directors. The Corporation is assisted by external advisors as required.
The Corporation’s project for the transition from Canadian GAAP to IFRS is progressing according to the established plan and the Corporation
expects to meet its target date for migration.
vii. Business combinations, consolidated financial statements and non-controlling
interests
In January 2009, the CICA issued Handbook section 1582, Business combinations, which replaces section 1581 of the same name, and
Sections 1601, Consolidated Financial Statements and 1602, Non-controlling interests, which together replace section 1600, Consolidated
Financial Statements. These new sections harmonize significant aspects of Canadian accounting standards with the IFRS that will be
mandated for publicly accountable entities with fiscal years beginning on or after January 1, 2011.
Section 1582 requires that all business acquisitions be measured at the fair value of the acquired entity at the acquisition date even if the
business combination is achieved in stages, or if less than 100% of the equity interest in the acquiree is owned at the acquisition date, and
expands the definition of a business subject to an acquisition. The section also establishes new guidance on the measurement of consideration
given and the recognition and measurement of assets acquired and liabilities assumed in a business combination. Furthermore, under this new
guidance, acquisition costs, which were previously included as a component of the consideration given, and any negative goodwill resulting
from the allocation of the purchase price, which was allocated as a reduction of non-current assets acquired under the previous standard, will
be recorded in earnings in the current period. This new section will be applied prospectively and will only impact the Corporation’s consolidated
financial statements for future acquisitions concluded in periods subsequent to the date of adoption.
Sections 1601 and 1602 dealing with consolidated financial statements require an entity to measure non-controlling interest upon acquisition
either at fair value or at the non-controlling interest's proportionate share of the acquiree's identifiable net assets. The new sections also require
non-controlling interest to be presented as a separate component of shareholders' equity.
The new standards will apply as of the beginning of the first annual reporting period beginning on or after January 1, 2011, with simultaneous
early adoption permitted. Early adoption may reduce the amount of restatement required upon conversion to IFRS. The Corporation has
elected not to early-adopt these sections, and in light of the harmonization of Canadian and International accounting standards taking effect at
that same date, these sections will not be applicable to the Corporation.
viii. Multiple deliverable revenue arrangements
In December 2009, the EIC issued a new abstract concerning multiple deliverable revenue arrangements, EIC-175, Multiple deliverable
revenue arrangements, which amended EIC-142, Revenue arrangements with multiple deliverables. EIC-175 requires a vendor to allocate
arrangement consideration at the inception of the arrangement to all deliverables using the relative selling price method, thereby eliminating the
use of the residual value method. The amendment also changes the level of evidence of the standalone selling price required to separate
deliverables when more objective evidence of the selling price is not available. EIC-175 should be adopted prospectively to revenue
arrangements entered into or materially modified in the first annual fiscal period beginning on or after January 1, 2011, with early adoption
permitted. The Corporation is currently evaluating the option to early-adopt this EIC in fiscal 2011.
C) Revenue recognition
The Corporation considers revenue to be earned as services are rendered, provided that ultimate collection is reasonably assured. The
Corporation earns revenue from several sources. The recognition of revenue from the principal sources is as follows:
• Revenue from Cable Television, HSI, Telephony and other telecommunications services are recognized when services are rendered;
• Revenue generated from sales of home terminal devices is recorded as equipment revenue upon activation of services as management
considers the sale of home terminal devices as a single unit of accounting of a multiple element arrangement;
• Installation revenue is deferred and amortized over the average life of a customer’s subscription for residential customers, not exceeding
four years, and over the term of the contract for business customers. Management considers that installation revenue is part of a multiple