Cogeco 2010 Annual Report Download - page 54

Consolidated Financial Statements COGECO CABLE INC. 2010 53
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 five years, with a corresponding
increase in contributed surplus. When the stock options are exercised, capital stock is credited by the sum of the consideration received and
the related portion previously recorded in the contributed surplus.
The Corporation measures incentive share units granted to employees based on the fair value of the Corporation’s subordinate voting shares at
the date of grant and a compensation expense is recognized over the vesting period, which is three years less one day, with a corresponding
increase in 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
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 under which services are acquired in exchange for
other services. 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 exchange 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 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.