Cogeco 2011 Annual Report Download - page 57

56 COGECO CABLE INC. 2011 Consolidated financial statements
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 in order to meet the
target date for migration.
iv. 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 adoption of International accounting standards taking effect at that same date,
these sections will not be applicable to the Corporation.
v. Multiple deliverable revenue arrangements
In December 2009, the Emerging Issues Committee (“EIC”) of the Canadian AcSB 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 has elected not to early adopt this EIC, and in light of the adoption of
International accounting standards taking effect at the same date, this EIC will not be applicable to the Corporation.
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, managed information technology and infrastructure, 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
element arrangement and has no standalone value. Accordingly, installation revenue is deferred and amortized at the same pace as
revenue from Cable Television, HSI, Telephony, managed information technology and infrastructure, and other telecommunications
services are earned;
• Promotional offers are accounted for as deductions from revenue when customers take advantage of such offers.
Amounts received or invoiced that do not comply with these criteria are accounted for as deferred and prepaid revenue.