Cogeco 2012 Annual Report Download - page 49

48 COGECO CABLE INC. 2012 Consolidated financial statements
The Corporation has established a special purpose entity (“SPE”) with the objective of mitigating the impact of stock price fluctuations in
connection with its Incentive Share Unit Plan. A SPE is consolidated if, based on an evaluation of the substance of its relationship with the
Corporation and the SPE’s risks and rewards, the Corporation concludes that it controls the SPE. A SPE controlled by the Corporation was
established under terms that impose strict limitations on the decision-making powers of the SPE’s management, resulting in the
Corporation receiving the majority of the benefits related to the SPE’s operations and net assets, being exposed to the majority of risks
incident to the SPE’s activities, and retaining the majority of the residual or ownership risks related to the SPE or its assets.
All inter-company transactions and balances and any unrealized revenue and expense are eliminated in preparing the consolidated
financial statements.
B. BUSINESS COMBINATIONS
Business acquisitions are accounted for using the acquisition method. Goodwill is measured as the excess of the fair value of the
consideration transferred including the recognized amount of any non-controlling interest in the acquiree over the net recognized amount
of the identifiable assets acquired and liabilities assumed, all measured at the acquisition date.
The consideration transferred is measured as the sum of the fair values of assets transferred, liabilities incurred, and equity instruments
issued by the Corporation at the acquisition date, including any asset or liability resulting from a contingent consideration arrangement, in
exchange for control of the acquiree.
An obligation to pay contingent consideration is classified as an asset or a liability or as equity. Contingent consideration classified as
equity is not re-measured. Contingent consideration classified as an asset or a liability is measured either as a financial instrument or as a
provision. Changes in fair values that qualify as measurement period adjustments of preliminary purchase price allocations are adjusted in
the current period and such changes are applied on a retroactive basis.
Acquisition costs, other than those associated with the issue of debt or equity securities, and integration and restructuring costs that the
Corporation incurs in connection with a business acquisition are recognized in profit or loss as incurred.
C. REVENUE RECOGNITION
Revenue is measured at the fair value of the consideration received or receivable, net of returns and discounts. The Corporation
recognizes revenue from the sale of products or the rendering of services when the following conditions are met:
 The amount of revenue and related costs can be measured reliably;
 The significant risks and rewards of ownership have been transferred to customers and there is no continuing management
involvement with the goods; and
 The recovery of the consideration is probable.
More specifically, the Corporation’s principal sources of revenue are recognized as follows:
 Monthly subscription revenue received for Cable Television, HSI and Telephony services and rental of equipment are
recognized as the services are provided;
 Revenue from data services, long-distance and other pay-per-use services are recorded as the services are provided;
 Revenue from managed services, Internet connectivity, dark fibre services and other advance communication solutions are
recorded as the services are provided;
 Revenue generated from the sale of home terminal devices or other equipment are recorded when the equipment is delivered
and accepted by the customers.
Multiple-element arrangements
The Corporation offers certain products and services as part of multiple deliverable arrangements. The Corporation evaluates each
deliverable in an arrangement to determine whether such deliverable would represent a separate component. Components are accounted
separately when:
 The delivered elements have stand-alone value to the customers; and
 There is objective and reliable evidence of fair value of any undelivered elements.
Consideration is measured and allocated amongst the components based upon their relative fair values and the relevant revenue
recognition policy is applied to them.
The Corporation considers that installation and activation fees are not separate components because they have no stand-alone value.
Accordingly, they are deferred and amortized as revenue at the same pace as the related telecommunications services are earned, which
is the average life of a customer’s subscription for Cable service customers or the term of the agreement for Enterprise service customers.
Unearned revenue, such as payments for goods and services received in advance of delivery, are recorded as deferred and prepaid
revenue until the service is provided or the product is delivered to the customer.