Cogeco 2012 Annual Report Download - page 13

12 COGECO CABLE INC. 2012 Management’s Discussion and Analysis (MD&A)
USEFUL LIVES OF PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS
Measurement of property, plant and equipment and intangible assets with finite useful lives requires estimates for determining the asset’s
expected useful lives and residual values. Management judgement is required to determine the components and the depreciation method
used.
PROVISIONS
Management judgement is used to determine the timing, likelihood and to quantify expected cash outflows.
FAIR VALUE MEASUREMENT OF DERIVATIVE FINANCIAL INSTRUMENTS
The fair value of derivative financial instruments is estimated using valuation techniques based on several inputs such as interest rates and
volatilities and foreign exchange rates.
MEASUREMENT OF DEFINED BENEFIT ASSETS AND LIABILITIES
The defined benefit pension plans liabilities are determined using actuarial calculations that are based on several assumptions. The actuarial
valuation uses the Corporation’s assumptions for the discount rate, expected long-term rate of return on plan assets, rate of compensation
increase and expected average remaining years of service of employees. If the actuarial assumptions are found to be significantly different
from the actual data subsequently observed, it could impact the reported amount of pension cost recognized in profit or loss, the actuarial gains
and losses recognized directly in other comprehensive income, and the net assets or net liabilities related to these obligations presented in the
consolidated statement of financial position.
MEASUREMENTS OF ASSETS
The impairment of non-financial assets requires the use of management judgement to identify the existence of indicators of impairment and the
determination of cash-generating units (“CGU”s). Furthermore, when determining the recoverable amount of a CGU, the Corporation uses
significant estimates such as the estimation of future cash flows and discount rates applicable. Any significant modification of market conditions
could translate into an inability to recover the carrying amounts of non-financial assets.
DEFERRED TAXES
Deferred tax assets and liabilities require estimates about the nature and timing of future permanent and temporary differences, the expected
timing of reversals of those temporary differences and the future tax rates that will apply to those differences. Judgment is also required in
determining the tax basis of indefinite life intangible assets and the resulting tax rate used to measure deferred taxes.
FINANCIAL INSTRUMENTS
Classification and measurement
All financial instruments, including derivatives, are included in the statement of financial position initially at fair value when the Corporation
becomes a party to the contractual obligations of the instrument.
Subsequent to initial recognition, non-derivative financial instruments are measured in accordance with their classification as described below:
 Loans and receivables are financial assets with fixed or determinable payments that are not quoted on an open market. Cash and cash
equivalents and trade and other receivables are classified as loans and receivables. They are measured at amortized cost using the
effective interest method, less any impairment loss;
 Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial
assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or
financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or
financial liabilities at fair value through profit or loss are recognized immediately in profit or loss; and
 Trade and other payables and loans and borrowings are classified as other liabilities. They are measured at amortized cost using the
effective interest method. Directly attributable transaction costs are added to the initial fair value of financial instruments except for those
incurred in respect of the Term Revolving Facility, which are amortized over the term of the related financing on a straight-line basis.
Derivative financial instruments and hedge accounting
The Corporation uses cross-currency swaps as derivative financial instruments to manage foreign exchange risk related to its foreign
denominated long-term debt. The Corporation does not hold or use any derivative financial instruments for speculative trading purposes.
Derivatives are recognized initially at fair value and related transaction costs are recognized in profit or loss as incurred. Subsequent to initial
recognition, derivatives are measured at fair value, and changes therein are recognized in profit or loss. Net receipts or payments arising from
derivative agreements are recognized as financial expense.